Answer:
Dr Interest receivable 123
Cr Interest revenue 123
Explanation:
Since Sheffield Company purchased the bonds at face value, all they need to report is accrued interest receivable. Since the interest is paid on January 1, they already have earned a year worth of interest.
Dr Interest receivable 123 (= $1,230 x 10%)
Cr Interest revenue 123
The next day, January 1, you will need to record the interest received:
Dr Cash 123
Cr Interest receivable 123
