Aug 1 06- JRS purchases 18 1k 12% bonds maturing on jul 31 07. Interest is due on Jul & Jan 31.
Does this require a year end adjusting entry and if so, what would it be?
2007-11-23 07:13:10 · 2 answers · asked by Vee 1 in Business & Finance ➔ Other - Business & Finance
Yes, you require adjusting entry.
Dec 31
Dr Bonds interest receivable 900
Cr Bonds interest income 900
(being interest calculated as follows : 18,000 x 12% x 5/12
Aug 1 to Dec 31 is 5 mths)
On Jan 31 you should receive $1,080. Your entry:
Dr Cash 1,080
Cr Bonds interest receivable 900
Cr Bonds interest income 180
On Jul 31 you should receive another $1,080. Your entry:
Dr Cash 1,080
Cr Bonds interest income 1,080
2007-11-24 18:29:13 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
Yes interest needs to be reported the year it was earned not paid. The adjusting entry by my calc. would be $721.97, the interest earned from July 31 - Dec 31.
2007-11-23 07:18:30 · answer #2 · answered by kelvy107 3 · 0⤊ 0⤋