Date Event Sept. 1, YR01 Oct. 1, YR01 Dec. 10, YR01 Dec. 31, YR01 Feb. 1, YR02 March 1, YR02 Purchased $2,000 of bonds issued by Target Inc. The bonds were purchased at 104 and Honda also paid a broker's fee of $60. These bonds have a coupon rate of 6% and pay interest once each year, on February 1*. The bonds are dated February 1, YR01, and mature on February 1, YR06 (five-year term). At present Honda does not have a definite plan for this investment beyond earning interest income. At the purchase date these bonds have an effective yield to maturity of 4.2%. Purchased 20 common shares of Nissan Co. stock. Paid $10 per share and a broker's fee of $4. This purchase does not give Honda the ability to control or influence the operating activities of Nissan Co. Received a total of $6 in cash dividends related to the investment in Nissan Co. common stock. Honda made all necessary adjusting journal entries related to the investment in Target bonds. On this date, the bonds issued by Target were selling for 106. The relevant valuation account had an unadjusted general ledger balance of $10 dr. Honda made all necessary adjusting journal entries related to the investment in Nissan stock. On this date, the relevant valuation account had an unadjusted general ledger balance of $6 cr. Nissan reported earnings of $1,000 for YR01 and its common stock closed at $9 per common share. Nissan has no preferred stock outstanding, Received interest on the Target Inc. bonds. On this date Honda sold 10 shares of Nissan stock for $12 per share and paid a broker's fee of $5. Purchased 120 common shares of Ford Co. common stock. Paid $20 per share and a broker's fee of $60. Ford Co. currently has 400 common shares outstanding, and this purchase gives Honda the ability to influence the operating activities of Ford Co. At the purchase date, the book value per common share for Ford Co. is $14.50. The difference between price paid and book value per common share for the Ford Co. stock is related to the following: (1) 50% of the difference relates to equipment with a remaining life of 5 years, (2) 25% relates to land, and (3) 25% relates to internally developed goodwill. On this date executives of Honda reviewed their investment holdings and decided the investment in bonds issued by Target should be reclassified as a held-to-maturity investment. Honda has the financial ability and intent to hold the bonds until they mature on February 1, YR06. At this date, the bonds were selling for 102. Received $20 in cash dividends related to the investment in Ford Co. common stock. Honda made all necessary adjusting journal entries related to the investments in Nissan stock and Ford stock. On this date, the relevant valuation account had an unadjusted general ledger balance of $20 cr. Nissan reported earnings of $2,000 for YR02 and its common stock closed at $20 per common share. Nissan has no preferred stock issue or outstanding. Ford Co. reported net income of $600 and the stock price closed at $14 per common share. Ford has 50 shares of 4% preferred stock outstanding. The preferred was issued on January 1, YR01, is cumulative, and has a $100 par. Ford had not declared or paid any preferred dividends since the preferred stock was issued. April 1, YR02 Sept. 30, YR02 Oct. 1, YR02 Dec. 31, YR02 Note: At 12/31/YR02, Honda would make adjusting entries related to its investment in bonds issued by Target. However, this examination question does not require these adjusting journal entries and your solution should not provide these journal entries. REQUIRED: A. Prepare a partial amortization schedule for the bond investment purchased on September 1, YR01. Your solution should cover through the interest payment to be received on February 1, YR03. Bond discount or premium is amortized using the effective-interest method of amortization. B. Prepare formal journal entries to record these events and any necessary adjusting journal entries in YR01 and YR02. For this problem calculate journal entry amounts to the nearest dollar. Relevant company accounting policies are as follows: The company's reporting period is January 1" to December 31". For bond investments, discount or premium is amortized using the effective interest method. Adjusting journal entries are made once each year at year-end (December 31"). Assume that unadjusted general ledger balances at September 1, YR01 are zero (SO) unless otherwise stated. Date Event Sept. 1, YR01 Oct. 1, YR01 Dec. 10, YR01 Dec. 31, YR01 Feb. 1, YR02 March 1, YR02 Purchased $2,000 of bonds issued by Target Inc. The bonds were purchased at 104 and Honda also paid a broker's fee of $60. These bonds have a coupon rate of 6% and pay interest once each year, on February 1*. The bonds are dated February 1, YR01, and mature on February 1, YR06 (five-year term). At present Honda does not have a definite plan for this investment beyond earning interest income. At the purchase date these bonds have an effective yield to maturity of 4.2%. Purchased 20 common shares of Nissan Co. stock. Paid $10 per share and a broker's fee of $4. This purchase does not give Honda the ability to control or influence the operating activities of Nissan Co. Received a total of $6 in cash dividends related to the investment in Nissan Co. common stock. Honda made all necessary adjusting journal entries related to the investment in Target bonds. On this date, the bonds issued by Target were selling for 106. The relevant valuation account had an unadjusted general ledger balance of $10 dr. Honda made all necessary adjusting journal entries related to the investment in Nissan stock. On this date, the relevant valuation account had an unadjusted general ledger balance of $6 cr. Nissan reported earnings of $1,000 for YR01 and its common stock closed at $9 per common share. Nissan has no preferred stock outstanding, Received interest on the Target Inc. bonds. On this date Honda sold 10 shares of Nissan stock for $12 per share and paid a broker's fee of $5. Purchased 120 common shares of Ford Co. common stock. Paid $20 per share and a broker's fee of $60. Ford Co. currently has 400 common shares outstanding, and this purchase gives Honda the ability to influence the operating activities of Ford Co. At the purchase date, the book value per common share for Ford Co. is $14.50. The difference between price paid and book value per common share for the Ford Co. stock is related to the following: (1) 50% of the difference relates to equipment with a remaining life of 5 years, (2) 25% relates to land, and (3) 25% relates to internally developed goodwill. On this date executives of Honda reviewed their investment holdings and decided the investment in bonds issued by Target should be reclassified as a held-to-maturity investment. Honda has the financial ability and intent to hold the bonds until they mature on February 1, YR06. At this date, the bonds were selling for 102. Received $20 in cash dividends related to the investment in Ford Co. common stock. Honda made all necessary adjusting journal entries related to the investments in Nissan stock and Ford stock. On this date, the relevant valuation account had an unadjusted general ledger balance of $20 cr. Nissan reported earnings of $2,000 for YR02 and its common stock closed at $20 per common share. Nissan has no preferred stock issue or outstanding. Ford Co. reported net income of $600 and the stock price closed at $14 per common share. Ford has 50 shares of 4% preferred stock outstanding. The preferred was issued on January 1, YR01, is cumulative, and has a $100 par. Ford had not declared or paid any preferred dividends since the preferred stock was issued. April 1, YR02 Sept. 30, YR02 Oct. 1, YR02 Dec. 31, YR02 Note: At 12/31/YR02, Honda would make adjusting entries related to its investment in bonds issued by Target. However, this examination question does not require these adjusting journal entries and your solution should not provide these journal entries. REQUIRED: A. Prepare a partial amortization schedule for the bond investment purchased on September 1, YR01. Your solution should cover through the interest payment to be received on February 1, YR03. Bond discount or premium is amortized using the effective-interest method of amortization. B. Prepare formal journal entries to record these events and any necessary adjusting journal entries in YR01 and YR02. For this problem calculate journal entry amounts to the nearest dollar. Relevant company accounting policies are as follows: The company's reporting period is January 1" to December 31". For bond investments, discount or premium is amortized using the effective interest method. Adjusting journal entries are made once each year at year-end (December 31"). Assume that unadjusted general ledger balances at September 1, YR01 are zero (SO) unless otherwise stated