Recording Entries for AFS Debt Securities - Effective Interest Method Adjust FVA at Year-End On July 1, 2020, West Company purchased for cash, eight $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 AFS securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries and FS Presentation for 2020 Journal Entries for 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. Stated Market Discount Date Interest Interest Amortization Amortized Cost Jul 1, 2020 Jan 1, 2021 $ Jul 1, 2021 Bond $ 0 0 0 0 $ 0 OS 0 0 0 Check Recording Entries for AFS Debt Securities - Effective Interest Method Adjust FVA at Year-End On July 1, 2020, West Company purchased for cash, eight $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 AFS securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries and FS Presentation for 2020 Journal Entries for 2021 b. Record the entry for the purchase of the bonds by West Company on July 1, 2020. c. Record the adjusting entries by West Company on December 31, 2020, to accrue interest revenue and adjust the investment to fair value. The fair value of the bonds at December 31, 2020, was $81,000. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar. Date Jul 1, 2020 Account Name Dr. Cr. b. 0 0 c. Dec 31, 2020 0 0 0 0 OOOO To accrue interest revenue Dec 31, 2020 0 0 0 0 To adjust investment to fair value d. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet. Ignore cash. Note: List accounts in alphabetical order. Note: Do not use a negative sign for an account with a normal balance. Income Statement 2020 Other Revenues and Gains 0 Balance Sheet, December 31 2020 Assets $ 0 0 Stockholders' Equity $ 0 Check > Recording Entries for AFS Debt Securities - Effective Interest Method Adjust FVA at Year-End On July 1, 2020, West Company purchased for cash, eight $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 AFS securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. Amortization Schedule Journal Entries and FS Presentation for 2020 Journal Entries for 2021 e. Record the receipt of interest on January 1, 2021. f. After the interest receipt on July 1, 2021, 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 g On December 31, 2021, the company's year-end, record the entry to eliminate the Fair Value Adjustment balance associated with the two bonds sold Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar. Account Name Jan 1, 2021 Date Dr. Cr. e. 0 0 Jul 1, 2021 0 0 e 0 0 0 0 To record receipt of interest Jul 1, 2021 0 0 0 0 0 0 To record sale of investment & Dec 31, 2021 0 0 0 Check
