Entries for TS: Effective Interest Method

On July $1$ of Year $1,$ West Company purchased for cash, $22,$ $$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$.$ West Company's annual reporting period ends December $31.$ Assume the effective interest method of amortization of any discounts or premiums.

Note: When answering the following questions, round answers to the nearest whole dollar.

a$.$ Prepare a bond amortization schedule for the life of the bonds using the effective interest method.

b$.$ Record the entry for the purchase of the bonds by West Company on July $1$ of Year $1.$

c$.$ Record the adjusting entries by West Company on December $31$ of Year $1$ to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on December $31$ of Year $1$ was $$228,250.$

d$.$ Record the receipt of interest on January $1$ of Year $2.$

e$.$ Record the sale of all of the bonds on January $2$ of Year $2$ for $$228,388,$ eliminating the related Fair Value Adjustment account balance. Prior to recording the sale, adjust the investment to fair value.