Entries for TS: Effective Interest Method On July 1 of Year 1, West Company purchased for cash, 24, $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. West Company's annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Date Jul. 1, Year 1 Jan. 1, Year 2 $ Jul. 1, Year 2 Jan. 1, Year 3 Jul. 1, Year 3 Jan. 1, Year 4 Jul. 1, Year 4 Stated Interest 6,000 $ 6,000 ✓ 6,000 ✓ 6,000 ✓ 6,000 ✓ 6,000 Market Interest Discount Amortization 0 x $ 0 x 0 x 0 x 0 x 0 x Journal Entries in Year 2 345 * 0 x 0 x 0 x 0 x 0 x Bond Amortized Cost $ 206,021 * 0 x 0 x 0 x 0 x 0 x 0 x

Entries for TS: Effective Interest Method On July 1 of Year 1, West Company purchased for cash, 24, $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. West Company's annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Note: When answering the following questions, round answers to the nearest whole dollar. Amortization Schedule Journal Entries in Year 1 a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Date Jul. 1, Year 1 Jan. 1, Year 2 $ Jul. 1, Year 2 Jan. 1, Year 3 Jul. 1, Year 3 Jan. 1, Year 4 Jul. 1, Year 4 Stated Interest 6,000 $ 6,000 ✓ 6,000 ✓ 6,000 ✓ 6,000 ✓ 6,000 Market Interest Discount Amortization 0 x $ 0 x 0 x 0 x 0 x 0 x Journal Entries in Year 2 345 * 0 x 0 x 0 x 0 x 0 x Bond Amortized Cost $ 206,021 * 0 x 0 x 0 x 0 x 0 x 0 x

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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