On July 1, 2020, West Company purchased for cash, ten $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 on July 1, 2023. 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. 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 record the unrealized gain or loss. The fair value of the bonds on December 31, 2020, was $99,600.Note: List multiple debits or credits (when applicable) in alphabetical order.Note: Round each amount to the nearest whole dollar. **Educational Website Content:**On July 1, 2020, West Company purchased for cash, ten $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 on July 1, 2023. 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. **Task b: Record the entry for the purchase of the bonds by West Company on July 1, 2020.****Task c: Record the adjusting entry by West Company on December 31, 2020, to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on December 31, 2020, was $99,600.**- **Note:** List multiple debits or credits (when applicable) in alphabetical order.- **Note:** Round each amount to the nearest whole dollar.**Table: Journal Entries**| Date | Account Name | Dr. | Cr. ||--------------|-----------------------------------------|-------------|-------------|| b. Jul. 1, 2020 | | 0 | 0 || | | 0 | 0 || | | 0 | 0 || | | 0 | 0 || c. Dec. 31, 2020 | To accrue interest revenue | 0 | 0 || | | 0 | 0 || Dec. 31, 2020 | To record unrealized gain or loss | 0 | 0 || | | 0 | 0 |**Tabs for Further Learning:**- **Amortization Schedule**- **Journal Entries in 2020**- **Journal Entries in 2021** **Financial Account Terms**1. **Cash** Fundamental asset representing available liquid funds.2. **Interest Receivable** Money expected to be received as interest from investments or loans.3. **Investment in TS** Funds allocated for short-term trading securities.4. **Fair Value Adjustment--TS** Changes to the valuation of trading securities to reflect current market values.5. **Investment in AFS Securities** Investments held as available-for-sale, not classified as trading or held to maturity.6. **Fair Value Adjustment--AFS** Adjustments made to available-for-sale securities for current market value.7. **Investment in HTM Securities** Bonds or other debt securities held with the intention to retain until maturity.8. **Investment in Stock** Ownership in shares of a company.9. **Fair Value Adjustment--Equity Securities** Revaluation of equities to align with market prices.10. **Fair Value Adjustment--Fair Value Option** Adjustment for securities where an entity chooses fair value measurement for financial reporting.11. **Allowance for Credit Losses** Provision for potential losses on credit agreements.12. **Accumulated Other Comprehensive Income** Comprehensive income not included in net income (e.g., unrealized gains/losses).13. **Unrealized Gain or Loss--OCI** Gains or losses not yet realized and reported in Other Comprehensive Income.14. **Unrealized Gain or Loss--Income** Gains or losses from investments that have not yet been realized in the income statement.15. **Dividend Revenue** Income earned from holding equity investments in stocks.16. **Interest Revenue** Income received from lending out money or credit.17. **Investment Income** Revenue from financial investments, including dividends and interest.18. **Loss on Impairment** Decline in the value of an asset that is deemed to be permanent.19. **Recovery of Loss on Impairment** Reversal of previously reported impairment loss when an asset recovers its value.20. **Loss on Sale of Investment** Financial loss from selling an investment asset for less than its purchase cost.21. **Gain on Sale of Investment** Profit earned from selling an investment asset for more than its purchase price.22. **N/A** Not applicable or not available in a

Bonds: It is also known as a fixed-income security, is a debt instrument created for the purpose of…

Answered: Cash Interest Receivable Investment in…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q