On July 1 of Year 1, 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 AFS securities. West Company's annual reporting period ends December 31. Assume the effective interest method of amortizatio of any discount or premium. • Note: When answering the following questions, round each amount to the nearest whole dollar. Amortization Schedule b. Record the entry for the purchase of the bonds by West Company on July 1 of Year 1. Date Jul. 1, Year 1 Journal Entries and Financial Statement Presentation for Year 1 Journal Entries for Year 2 Date Dec. 31, Year 1 Dec. 31, Year 1 Account Name To record purchase of bonds. Account Name c. Record the adjusting entries by West Company on December 31 of Year 1 to accrue interest revenue and adjust the investment to fair value. The fair value of the bonds at December 31 was $81,000. To accrue interest revenue. Debit To adjust investment to fair value. 0 0 Debit 0 0 0 Credit 0 0 0 0 Credit 0 0 0 0 0
On July 1 of Year 1, 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 AFS securities. West Company's annual reporting period ends December 31. Assume the effective interest method of amortizatio of any discount or premium. • Note: When answering the following questions, round each amount to the nearest whole dollar. Amortization Schedule b. Record the entry for the purchase of the bonds by West Company on July 1 of Year 1. Date Jul. 1, Year 1 Journal Entries and Financial Statement Presentation for Year 1 Journal Entries for Year 2 Date Dec. 31, Year 1 Dec. 31, Year 1 Account Name To record purchase of bonds. Account Name c. Record the adjusting entries by West Company on December 31 of Year 1 to accrue interest revenue and adjust the investment to fair value. The fair value of the bonds at December 31 was $81,000. To accrue interest revenue. Debit To adjust investment to fair value. 0 0 Debit 0 0 0 Credit 0 0 0 0 Credit 0 0 0 0 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please correct Solution with Explanation and do not give image format
Transcribed Image Text:On July 1 of Year 1, 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 AFS securities. West Company's annual reporting period ends December 31. Assume the effective interest method of amortization
of any discount or premium.
• Note: When answering the following questions, round each amount to the nearest whole dollar,
Amortization Schedule
b. Record the entry for the purchase of the bonds by West Company on July 1 of Year 1.
Date
Jul. 1, Year 1
Journal Entries and Financial Statement Presentation for Year 1 Journal Entries for Year 2
Date
Dec. 31, Year 1
Dec. 31, Year 1
Account Name
To record purchase of bonds.
Account Name
c. Record the adjusting entries by West Company on December 31 of Year 1 to accrue interest revenue and adjust the investment to fair value. The fair value of the bonds at December 31 was
$81.000.
To accrue interest revenue.
Debit
To adjust investment to fair value.
0
0
Debit
0
0
0
Credit
0
0
0
0
Credit
0
0
0
0
0
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