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Question 3 Partially correct Not graded P Flag question Recording Entries for HTM Debt Securities Effective Interest Method On July 1, 2020, West Company purchased
Question 3 Partially correct Not graded P Flag question Recording Entries for HTM Debt Securities Effective Interest Method On July 1, 2020, West Company purchased for cash, twenty $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries in 2020 Financial Statement Presentation Journal Entries in 2021 a. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method. Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Stated Market Discount Bond Date Interest Interest Amortization Amortized Cost Jul. 1, 2020 $ 10,920 X Jan. 1, 2021 $ 0 * $ 0 x $ 0x OX Jul. 1, 2021 0x 0x 0 X 0 X Check Recording Entries for HTM Debt Securities, Effective Interest Method On July 1, 2020, West Company purchased for cash, twenty $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries in 2020 Financial Statement Presentation Journal Entries in 2021 b. Record the entry for the purchase of the bonds by West Company on July 1, 2020. c. Record the adjusting entry by West Company on December 31, 2020. The fair value of the bonds at December 31, 2020, was $202,500. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Date Jul. 1, 2020 Account Name Investment in HTM Securities b. Dr. 10,920 x 0 Cash Cr. 0 10,920 x O 0 500 x C. Dec. 31, 2020 Cash 9 X Investment in HTM Securities 491 x or Interest Revenue Check Recording Entries for HTM Debt Securities Effective Interest Method On July 1, 2020, West Company purchased for cash, twenty $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries in 2020 Financial Statement Presentation Journal Entries in 2021 d. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet. Note: List accounts in alphabetical order. 2020 Income Statement Other Revenues and Gains Interest Receivable 0x December 31, 2020 Balance Sheet Assets Cash 0 x 0 x Interest Receivable 4 x Recording Entries for HTM Debt Securities-Effective Interest Method On July 1, 2020, West Company purchased for cash, twenty $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries in 2020 Financial Statement Presentation Journal Entries in 2021 0 x e. Record the receipt of interest on January 1, 2021. f. After the interest payment on July 1, 2021, two of the bonds were sold for $48,250 cash. Provide the required entries on July 1, 2021. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Date Account Name e. Jan. 1, 2021 Interest Receivable 0 x Interest Receivable 0 f. Jul. 1, 2021 Cash 0 x Interest Receivable 0 x Investment in TS To record receipt of interest. Jul. 1, 2021 Cash 0x Interest Receivable OX Investment in AFS Securities X Ox To record sale of bonds.
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