On July 1 of Year 1, West Company purchased for cash, twenty-two, $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. West Company's annual reporting period ends December 31. Assume the effective interest method of amortizat of any discount or premium. Note: When answering the following questions, round answers to the nearest whole dollar.
On July 1 of Year 1, West Company purchased for cash, twenty-two, $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. West Company's annual reporting period ends December 31. Assume the effective interest method of amortizat of any discount or premium. Note: When answering the following questions, round answers to the nearest whole dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Entries for HTM Debt Securities: Effective Interest Method
On July 1 of Year 1, West Company purchased for cash, twenty-two, $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. 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 answers to the nearest whole dollar.
Amortization Schedule Journal Entries in Year 1
e. Record the receipt of interest on January 1 of Year 2.
Date
Jan. 1, Year 2 Cash
Account Name
Interest Receivable
To record interest received.
Financial Statement Presentation
Debit
9,900
0
Credit
0
9,900✔
Journal Entries in Year 2
f. After the interest was received on July 1 of Year 2, two of the bonds were sold for $17,756 cash. Provide the required entries on July 1 of Year 2 for the receipt of interest and the sale of the two bonds.
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