b. Record the entry for the purchase of the bonds by West Company on July 1. Date Account Name Jul. 1, Year 1 Investment in HTM Securities Cash To record investment purchase. Debit 77,970 0 Credit 0 77,970 c. Record the adjusting entry by West Company on December 31. The fair value of the bonds at December 31 was $81,000. Date Account Name Dec. 31, Year 1 Investment in HTM Securities Interest Receivable Interest Revenue To record year end adjusting entry. Debit Credit 299 0 x 3,600 0 ✓ 0 3,899 x a. Prepare a bond amortization schedule for the current year and the following year using the straight-line interest method. Note: Round each amount entered into the schedule below to the nearest whole dollar. Date Stated Interest Market Interest Discount Bond Amortization Amortized Cost Jul. 1, Year 1 $ 77,970 Jan. 1, Year 2 $ 3,600 $ Jul. 1, Year 2 3,600 3,899 * $ 3,913 x 299 x 78,269 x 313 x 78,582 x

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
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On July 1 of the current year, West Company purchased for cash, 8, $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 held-to-maturity securities. The annual reporting period ends December 31. Assume the straight-line interest method of amortization of any discount or premium.

b. Record the entry for the purchase of the bonds by West Company on July 1.
Date
Account Name
Jul. 1, Year 1 Investment in HTM Securities
Cash
To record investment purchase.
Debit
77,970
0
Credit
0
77,970
c. Record the adjusting entry by West Company on December 31. The fair value of the bonds at December 31 was $81,000.
Date
Account Name
Dec. 31, Year 1 Investment in HTM Securities
Interest Receivable
Interest Revenue
To record year end adjusting entry.
Debit
Credit
299
0 x
3,600
0 ✓
0
3,899 x
Transcribed Image Text:b. Record the entry for the purchase of the bonds by West Company on July 1. Date Account Name Jul. 1, Year 1 Investment in HTM Securities Cash To record investment purchase. Debit 77,970 0 Credit 0 77,970 c. Record the adjusting entry by West Company on December 31. The fair value of the bonds at December 31 was $81,000. Date Account Name Dec. 31, Year 1 Investment in HTM Securities Interest Receivable Interest Revenue To record year end adjusting entry. Debit Credit 299 0 x 3,600 0 ✓ 0 3,899 x
a. Prepare a bond amortization schedule for the current year and the following year using the straight-line interest method.
Note: Round each amount entered into the schedule below to the nearest whole dollar.
Date
Stated
Interest
Market
Interest
Discount
Bond
Amortization Amortized Cost
Jul. 1, Year 1
$
77,970
Jan. 1, Year 2 $
3,600
$
Jul. 1, Year 2
3,600
3,899 * $
3,913 x
299 x
78,269 x
313 x
78,582 x
Transcribed Image Text:a. Prepare a bond amortization schedule for the current year and the following year using the straight-line interest method. Note: Round each amount entered into the schedule below to the nearest whole dollar. Date Stated Interest Market Interest Discount Bond Amortization Amortized Cost Jul. 1, Year 1 $ 77,970 Jan. 1, Year 2 $ 3,600 $ Jul. 1, Year 2 3,600 3,899 * $ 3,913 x 299 x 78,269 x 313 x 78,582 x
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