Chapter C, Problem 1MCQ

To determine

Ascertain the amount of interest revenue accrued at December 31.

Answer to Problem 1MCQ

d. The amount of interest revenue accrued at December 31 is $625.

Explanation of Solution

Working note:

Debt investment:

Debt investments refer to the investments made in debt instrument by the investor at a predetermined interest and maturity period. Examples of debt investments are corporate bonds, government bonds, certificate of deposits.

Ascertain the amount of interest revenue accrued at December 31 as follows:

$\begin{array}{c}\text{Interest revenue accrue}=\left[\begin{array}{l}\text{Purchase value of bond}\\ \times \text{Interest rate of bond}\\ \times \text{Interest period}\end{array}\right]\\ =\$30,000\times \frac{\text{5}}{\text{100}}\times \frac{\text{5}}{\text{12}}\\ =\$625\end{array}$

From the above Calculation it is clear that option (a), (b), (c) and (e) are incorrect, only option (d) is correct.

Conclusion

Hence the correct option is option c.