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Assume that on July 1, Jerome, Inc., paid $100,000 to buy Potter's 8 percent, two-year bonds with a $100,000 par value. The bonds pay interest semiannually on December 31 and June 30. Jerome intends to hold the bonds until they mature. Complete the necessary December 31 entry to record.

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Answer:

Dr Potter's 8% Bonds 100000

Cr Cash 100000

Dr Cash 4000

Cr Interest from Bonds 4000

Explanation:

Preparation of the journal entry to Complete the necessary December 31 entry to record

July, 1

Dr Potter's 8% Bonds 100000

Cr Cash 100000

(Being 8% Bonds purchased)

December, 31

Dr Cash 4000

Cr Interest from Bonds 4000

(100,000*8%*1/2)

(Being Interest received on 8% Bonds)

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