On July 1 of the current year, West Company purchased for cash, 20, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest. payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1, The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore Income taxes. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Date Stated Market Discount Bond Interest Interest Amortization Amortized Cost Jul. 1. Year 1 $ OX Jan 1. Year 25 0 x OX OX Ox Jul. 1. Year 2 OX OX OX OX Jan. 1. Year 3 OX OX OX OX Jul 1. Year 3 OX OX OX Jan. 1 Year 4 OX OX OX DX Jul. 1. Year 4 OX OX OX OX On July 1 of the current year, West Company purchased for cash, 20, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% Interest, payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. OX Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 b. Record the entry for the purchase of the bonds by West Company on July 1. Account Name Debit Credit Date jul. 1. Year 0 0 0.X To record investment purchase c. Record the adjusting entries by West Company on December 31 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on that date was $207,500. Account Name Debit Credit Date Dec. 31. Year 1 0 0 0 0 x OX OX To accrue interest revenue Dec. 31. Year 1 0 0 OX OX To record unrealized taimeross On July 1 of the current year, West Company purchased for cash, 20, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 d. Record the receipt of interest on January 1, of the following year. Cr. Date Account Name Jan. 1. Year 2 Cash Interest Receivable To record the receipt of interest Dr. 750 0 0 x 750 x e. Assume that all of the bonds were sold on January 2 for $207,500, after the receipt of interest in part d. Record the entry for the sale of the bonds. v v Date Account Name Jan. 2. Year 2 Cash Gain on Sale of investment Investment in TS To record the sale of investments Dr. 33.200 0 OX 29,314 X 3.886 v f. Record the adjustment to the Fair Value Adjustment account on December 31, assuming no additional TS investments Account Name Dr. Or. Date Dec. 31. Year 2 OX 0 0 OX Toxdust EVA account | On July 1 of the current year, West Company purchased for cash, 20, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest. payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1, The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore Income taxes. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Date Stated Market Discount Bond Interest Interest Amortization Amortized Cost Jul. 1. Year 1 $ OX Jan 1. Year 25 0 x OX OX Ox Jul. 1. Year 2 OX OX OX OX Jan. 1. Year 3 OX OX OX OX Jul 1. Year 3 OX OX OX Jan. 1 Year 4 OX OX OX DX Jul. 1. Year 4 OX OX OX OX On July 1 of the current year, West Company purchased for cash, 20, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% Interest, payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. OX Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 b. Record the entry for the purchase of the bonds by West Company on July 1. Account Name Debit Credit Date jul. 1. Year 0 0 0.X To record investment purchase c. Record the adjusting entries by West Company on December 31 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on that date was $207,500. Account Name Debit Credit Date Dec. 31. Year 1 0 0 0 0 x OX OX To accrue interest revenue Dec. 31. Year 1 0 0 OX OX To record unrealized taimeross On July 1 of the current year, West Company purchased for cash, 20, $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature in three years on July 1. The bonds are classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 d. Record the receipt of interest on January 1, of the following year. Cr. Date Account Name Jan. 1. Year 2 Cash Interest Receivable To record the receipt of interest Dr. 750 0 0 x 750 x e. Assume that all of the bonds were sold on January 2 for $207,500, after the receipt of interest in part d. Record the entry for the sale of the bonds. v v Date Account Name Jan. 2. Year 2 Cash Gain on Sale of investment Investment in TS To record the sale of investments Dr. 33.200 0 OX 29,314 X 3.886 v f. Record the adjustment to the Fair Value Adjustment account on December 31, assuming no additional TS investments Account Name Dr. Or. Date Dec. 31. Year 2 OX 0 0 OX Toxdust EVA account |