Answered step by step
Verified Expert Solution
Question
1 Approved Answer
I need help with part e through g please. I'm still not 100% sure if the first parts are correct. Thank you! On July 1
I need help with part e through g please. I'm still not 100% sure if the first parts are correct. Thank you!
On July 1 of the current year, West Company purchased for cash, 18, $10,000 bonds of North Corporation to yield 10%. The bonds pay 9% 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 AFS securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Note: When answering the following questions, round each amount to the nearest whole dollar. a. Prepare a bond amortization schedule for the current year and the following year using the effective interest method. Date Stated Market Discount Bond Interest Interest Amortization Amortized Cost Jul. 1, Year 1 $ 175,429 Jan. 1. Year 2 $ 8,100 $ 8,771 $ 671 176,100 Jul. 1, Year 2 8,100 8,805 705 176,805 b. Record the entry for the purchase of the bonds by West Company on July 1. Date Jul. 1, Year Account Name Investment in AFS Securities Cash To record purchase of bonds. Debit 180,000 0 Credit 0 180,000 c. Record the adjusting entries by West Company on December 31 to accrue interest revenue and adjust the investment to fair value. The fair value of the bonds at December 31 was $182,250. Credit Date Account Name Dec 31, Year 1 Fair Value Adjustment-AFS Interest Receivable 0 Debit 671 8,100 0 0 Interest Revenue 8.771 Dec. 31, Year 1 2,250 0 To accrue interest revenue. Investment in AFS Securities Unrealized Gain or Loss-Income To adjust investment to fair value. 0 0 To record receipt of interest. f. After the interest receipt on July 1, two of the bonds were sold for $17,756 cash. Record the entry for (1) the receipt of interest and (2) the sale of the bond investment. Account Name Debit Credit Date Jul. 1. Year 2 > 0 0 0 0 0 0 0 0 0 0Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started