That is a declaration followed by using a question mark. I will have a bet: interest accrues every day on a bond and the person promoting the bond will not obtain the interest cost from the organization (you will). You're going to no longer be entitled to the entire of the interest payment so that you need to pay away the interest that has collected thus far. Assuming the curiosity is paid half of every year then you're going to acquire a cost for $4000 in due direction. But it surely appears like you may have bought it halfway by means of the interest interval (about three months). So the vendor is entitled to three months interest ($2000) and you might be entitled to 3 months interest ($2000). Whether it is paid annually then you'll acquire twelve months interest ($8000) although you've gotten simplest held it for 9 months ($6000). Hope that's what you're asking!
Answers & Comments
Verified answer
1. The number of bonds purchased has not been given in the question. Hence, the entry for purchase is being made without the amount.
2. The entries will be:
-For purchase of bonds:
Dr Investment A/c (Bonds) ..... _______ Purchase Price
Cr Cash/Bank ............ ................ .................... _________
-For Accrued Interest on bonds purchased:
Dr Interest Receivable ....... $2,000
Cr Cash/Bank ................ .................... ............ $2,000*
*The accrued interest can even be capitalised by adding the amount to purchase value.
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That is a declaration followed by using a question mark. I will have a bet: interest accrues every day on a bond and the person promoting the bond will not obtain the interest cost from the organization (you will). You're going to no longer be entitled to the entire of the interest payment so that you need to pay away the interest that has collected thus far. Assuming the curiosity is paid half of every year then you're going to acquire a cost for $4000 in due direction. But it surely appears like you may have bought it halfway by means of the interest interval (about three months). So the vendor is entitled to three months interest ($2000) and you might be entitled to 3 months interest ($2000). Whether it is paid annually then you'll acquire twelve months interest ($8000) although you've gotten simplest held it for 9 months ($6000). Hope that's what you're asking!