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 a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Date Stated Market Discount Bond Interest Interest Amortization Amortized Cost 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
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 a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method. Date Stated Market Discount Bond Interest Interest Amortization Amortized Cost 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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
a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method.
| Date | Stated | Market | Discount | Bond |
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| Interest | Interest | Amortization | Amortized Cost | |
| Jul. 1, Year 1 |
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