Record the purchase of bonds on July 1
Date Account Titles Debit Credit
July.1 Investment in Bonds $7,467,200.00
Cash $7,467,200.00
Answer 2
Record the receipt of interest on December 31 of current year
Date Account Titles Debit Credit
December ,31 Cash $260,000.00
Interest Income $224,016.00
Investment in Bonds $35,984.00
Interest Income as of December 31 = Cost of investment as of July 1 x Market Interest rate / 2 = $74,67,200 x 6%/2 = $2,24,016
Interest received as of December 31 = Face value of bond x stated interest rate / 2 = $65,00,000 x 8%/2 = $2,60,000
Interest profits — the income someone receives from positive bank bills or from lending money to someone else. taxable hobby earnings — interest profits this is difficulty to profits tax. All hobby profits are taxable until mainly excluded.
Hobby receivable is commonly considered a current asset, however, can be non-modern-day with one exception. current belongings are any property so as to provide an economic fee for or within twelve months. hobby receivable is an amount of hobby this is owed but has no longer been paid.
The interest fee is one of the core prices located inside the income statement. A business enterprise needs to finance its belongings both via debt or equity. With the former, the corporation will incur a cost associated with the cost of borrowing.
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