Question
1) Select the correct entry for the following transactions for Oak Inc., which purchased a $10,000 bond issued by SD Inc., at par value on
1) Select the correct entry for the following transactions for Oak Inc., which purchased a $10,000 bond issued by SD Inc., at par value on January 1, X1. The bond pays 5% interest, annually, starting January 1, X2 each year.
The purchase of the bond on January 1, X1
a. Debit Bond Payable $10,000, Credit Cash $10,000 b. Debit Cash, $10,000, Credit Bond Payable $10,000 c. Debit Bond Investment $10,000, Credit Cash $10,000 d. Debit Cash, $10,000, Credit Bond Investment $10,000
The accrual of interest receivable on December 31, X1
a. Debit Cash $500, Credit Interest Income $500 b. Debit Interest Expense, $500, Credit Cash $500 c. Debit Interest Receivable $500, Credit Bond Investment $500 d. Debit Interest Receivable, $500, Credit Interest Income $500
The receipt of interest on January 1, X2.
a. Debit Cash $500, Credit Interest Income $500 b. Debit Cash, $500, Credit Interest Receivable $500 c. Debit Interest Receivable $500, Credit Cash $500 d. Debit Interest Receivable $500, Credit Interest Income $500
The sale of the bond on January 2, x2 for $10,300 (ignore any interest that accrues during the first two days of the year).
a. Debit Cash $10,300, Credit Bond Investment $10,000, Credit Gain $300. b. Debit Cash, $10,300, Credit Bond Investment $10,300 c. Debit Cash $10,300, Credit Gain $10,300 d. Debit Cash, $10,300, Credit Interest Income $10,300
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