On May 1, Pierce Company purchased $60,000 of Stanton Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest.
The journal entry Pierce will record on February 1 will include the total proceeds from the February 1 sale credit to Gain on Sale of Investments for $1,500
(this would also include a
Dr: Cash for $51,500
Cr: Investment-Stanton Company for $50,000)
Interest is the monetary fee for the privilege of borrowing money, usually expressed as an annual rate (APR). Interest is the amount a lender or financial institution receives for lending money.
In finance and economics, interest is a payment made by a borrower or deposit-taking financial institution to a lender or depositor in excess of the repayment of principal at a specified rate. It is different from a fee that a borrower can pay to a lender or a third party. Interest is usually given as an annual percentage of the loan amount. This percentage is called the interest rate on the loan. For example, if you deposit money in a savings account, the bank will pay you interest. Banks pay you to hold your money and use it to invest in other transactions.
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