Stated Market Discount Bond Date Interest Interest Amortization Amortized Cost Jul. 1, Year 1 $ 3,89,166 Jan. 1, Year 2 $ 10,000 $ 11,675 $ 1,675 $ 3,90,841 Jul. 1, Year 2 $ 10,000 $ 11,725 $ 1,725 $ 3,92,566 Jan. 1, Year 3 $ 10,000 $ 11,777 $ 1,777 $ 3,94,343 Jul. 1, Year 3 $ 10,000 $ 11,830 $ 1,830 $ 3,96,173 Jan. 1, Year 4 $ 10,000 $ 11,885 $ 1,885 $ 3,98,058 Jul. 1, Year 4 $ 10,000 $ 11,942 $ 1,942 $ 4,00,000 Explanations: Stated Interest = 40 * $10000 * 5% * 1/2 = $10000 On July 1 of the current year, West Company purchased for cash, 40, $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. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 Journal Entries in Year 2 d. Record the receipt of interest on January 1, of the following year. Date Account Name Jan. 1, Year 2 Cash Interest Receivable To record the receipt of interest. Dr. Cr. 750 0 0x 750 x e. Assume that all of the bonds were sold on January 2 for $415,000, after the receipt of interest in part d. Record the entry for the sale of the bonds. Date Account Name Jan. 2, Year 2 Cash Gain on Sale of Investment Investment in TS To record the sale of investments. v Dr. Cr. 33,200 0x 0 0 33,200 x 0x f. Record the adjustment to the Fair Value Adjustment account on December 31, assuming no additional TS investments. Date Account Name Dec. 31, Year 2 Unrealized Gain or Loss-Income Fair Value Adjustment-TS Check To adjust FVA account. Dr. Cr. 0 DX 0 0 x