Question 3 Not complete Mark 1.20 out of 4,00 P Flag question Adjust EVA at Year-End On July 1 of the current year, West Company purchased for cash, 8, 510,000 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, Amortization Schedule Journal Entries and Financial Statement Presentation for Year 1 Journal Entries for Year 2 a. Prepare a bond amortization schedule for the current year and the following year using the effective interest method Date Stated Interest Jul. 1. Year 1 Jan. 1 Year 25 3.600 5 Jul. 1. Year 2 3,600 Market Discount Bond Interest Amortization Amortized Cost $ 77.970 3.898 $ 298 78.268 3.913 313 78.582 Check Fantally correa Marks for this submission: 1.20/4.00 Amortization Schedule Journal Entries and Financial Statement Presentation for Year 1 Journal Entries for Year 2 b. Record the entry for the purchase of the bonds by West Company on July 1. Date Account Name Debit Credit JUL. 1. Year 1 0 OX 77.970 0 Cash To record purchase of bonds 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 $81,000. Date Dec. 31. Year 1 Account Name Debit Credit 0 0 OX OX Ox 0 To accrue Interest revenue Dec 31 Year OX Oo OX To adjust investment to fair value. d. Indicate the effects of this investment on the income statement for the year and year-end balance sheet. Ignore cash. Note: Do not use a negative sign for an account with a normal balance Income Statement Other Revenues and Gains Interest revenue OX Balance Sheet. December 31 Assets Interest recevable s Investment in AFS Securities s Stockholders' Equity Accumulated other comprehensive income 5 0 x OX Check Amortization Schedule Journal Entries and Financial Statement Presentation for Year Journal Entries for Year 2 e. Record the receipt of interest on January 1 of the following year Account Name Debit Credit Date Jan. 1. Year 2 0 0 X 0 To record receipt of interest f. After the interest receipt on July 1, two of the bonds were sold for $19,300 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 OX OX OX 0 To record receipt of interest Jul. 1. Year 2 0 0 X
