1.

Investment in debt securities at premium.

On April 1, 2018, West Company purchased $1,200,000 of 6% bonds for $1,247,250, plus accrued interest as an available-for-sale security. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2023.

Instructions

(a)Prepare the journal entry on April 1, 2018.

(b)The bonds are sold on November 1, 2019 at 103 plus accrued interest. Amortization was recorded when interest was received by the straight-line method (by months and round to the nearest dollar).

2..

Investment in debt securities at a discount.

On May 1, 2018, Kirmer Corporation purchased $3,000,000 of 12% bonds, interest payable on January 1 and July 1, for $2,813,000 plus accrued interest. The bonds mature on January 1, 2024. Amortization is recorded when interest is received by the straight-line method (by months and round to the nearest dollar). (Assume bonds are available for sale.)

Instructions

(a)Prepare the entry for May 1, 2018.

(b)The bonds are sold on August 1, 2019 for $2,825,000 plus accrued interest.