PART 1 Recording Entries for TS—Effective Interest MethodAdjust FVA at Sale and Year-EndOn July 1, 2020, West Company purchased for cash, eighteen $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.Amortization Schedule (PART 1)Journal Entries in 2020Journal Entries in 2021a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method.Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Adjust market interest in the final year of the bond term for any net rounding difference.DateStatedInterestMarketInterestDiscountAmortizationBondAmortized CostJul. 1, 2020 AnswerJan. 1, 2021AnswerAnswerAnswerAnswerJul. 1, 2021AnswerAnswerAnswerAnswerJan. 1, 2022AnswerAnswerAnswerAnswerJul. 1, 2022AnswerAnswerAnswerAnswerJan. 1, 2023AnswerAnswerAnswerAnswerJul. 1, 2023AnswerAnswerAnswerAnswerTotalsAnswerAnswerAnswer Recording Entries for TS–Effective Interest MethodAdjust FVA at Sale and Year-EndOn July 1, 2020, West Company purchased for cash, eighteen $10,000 bonds of North Corporation at a market rate of 6%. The bonds pay 5% interest, payable on a semiannual basis each July 1 and January 1, and mature on July 1, 2023. The bondsare classified as trading securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discounts or premiums. Ignore income taxes.Amortization ScheduleJournal Entries in 2020Journal Entries in 2021a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method.Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Adjust market interest in the final year of the bond term for any net rounding difference.StatedMarketDiscountBondDateInterestInterestAmortization Amortized CostJul. 1, 2020$Jan. 1, 2021 $24$Jul. 1, 2021Jan. 1, 2022Jul. 1, 2022Jan. 1, 2023Jul. 1, 2023Totals$$2$

Bond amortization schedule: Under this schedule, the amount of interest and discount or premium…

Answered: PART 1 Recording Entries for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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PART 1

Recording Entries for TS—Effective Interest Method

Adjust FVA at Sale and Year-End

On July 1, 2020, West Company purchased for cash, eighteen $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.

Amortization Schedule (PART 1)
Journal Entries in 2020
Journal Entries in 2021

a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method.

Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Adjust market interest in the final year of the bond term for any net rounding difference.

Date	Stated Interest	Market Interest	Discount Amortization	Bond Amortized Cost
Jul. 1, 2020				Answer
Jan. 1, 2021	Answer	Answer	Answer	Answer
Jul. 1, 2021	Answer	Answer	Answer	Answer
Jan. 1, 2022	Answer	Answer	Answer	Answer
Jul. 1, 2022	Answer	Answer	Answer	Answer
Jan. 1, 2023	Answer	Answer	Answer	Answer
Jul. 1, 2023	Answer	Answer	Answer	Answer
Totals	Answer	Answer	Answer

Recording Entries for TS–Effective Interest Method
Adjust FVA at Sale and Year-End
On July 1, 2020, West Company purchased for cash, eighteen $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.
Amortization Schedule
Journal Entries in 2020
Journal Entries in 2021
a. Prepare a bond amortization schedule for the life of the bonds using the effective interest method.
Note: Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Adjust market interest in the final year of the bond term for any net rounding difference.
Stated
Market
Discount
Bond
Date
Interest
Interest
Amortization Amortized Cost
Jul. 1, 2020
$
Jan. 1, 2021 $
24
$
Jul. 1, 2021
Jan. 1, 2022
Jul. 1, 2022
Jan. 1, 2023
Jul. 1, 2023
Totals
$
$
2$

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