Recording Entries for HTM Debt Securities— Effective Interest MethodOn July 1, 2020, West Company purchased for cash, sixteen $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium. d. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet.Note: List accounts in alphabetical order. **List of Financial Terms**- Cash- Interest Receivable- Investment in Trading Securities (TS)- Fair Value Adjustment—Trading Securities (TS)- Investment in Available-for-Sale (AFS) Securities- Fair Value Adjustment—Available-for-Sale (AFS)- Investment in Held-to-Maturity (HTM) Securities- Investment in Stock- Fair Value Adjustment—Equity Securities- Fair Value Adjustment—Fair Value Option- Allowance for Credit Losses- Accumulated Other Comprehensive Income- Unrealized Gain or Loss—Other Comprehensive Income (OCI)- Unrealized Gain or Loss—Income- Dividend Revenue- Interest Revenue- Investment Income- Loss on Impairment- Recovery of Loss on Impairment- Loss on Sale of Investment- Gain on Sale of Investment- Not Applicable (N/A)This list outlines various financial terms, often related to investments and accounting, emphasizing adjustments and income considerations within financial statements. **Recording Entries for HTM Debt Securities—Effective Interest Method**On July 1, 2020, West Company purchased for cash sixteen $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium.- **Amortization Schedule**- **Journal Entries in 2020**- **Financial Statement Presentation**- **Journal Entries in 2021****Task:**d. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet.**Note:** List accounts in alphabetical order.### Income Statement 2020- **Other Revenues and Gains**: $______### Balance Sheet December 31, 2020- **Assets**: $______

Income statements refers to those financial statements that shows the profitability of a business…

Answered: Recording Entries for HTM Debt…

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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Recording Entries for HTM Debt Securities— Effective Interest Method

On July 1, 2020, West Company purchased for cash, sixteen $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium.

d. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet.

Note: List accounts in alphabetical order.

**List of Financial Terms**

- Cash
- Interest Receivable
- Investment in Trading Securities (TS)
- Fair Value Adjustment—Trading Securities (TS)
- Investment in Available-for-Sale (AFS) Securities
- Fair Value Adjustment—Available-for-Sale (AFS)
- Investment in Held-to-Maturity (HTM) Securities
- Investment in Stock
- Fair Value Adjustment—Equity Securities
- Fair Value Adjustment—Fair Value Option
- Allowance for Credit Losses
- Accumulated Other Comprehensive Income
- Unrealized Gain or Loss—Other Comprehensive Income (OCI)
- Unrealized Gain or Loss—Income
- Dividend Revenue
- Interest Revenue
- Investment Income
- Loss on Impairment
- Recovery of Loss on Impairment
- Loss on Sale of Investment
- Gain on Sale of Investment
- Not Applicable (N/A)

This list outlines various financial terms, often related to investments and accounting, emphasizing adjustments and income considerations within financial statements.

**Recording Entries for HTM Debt Securities—Effective Interest Method**

On July 1, 2020, West Company purchased for cash sixteen $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 on July 1, 2023. The bonds are classified as held-to-maturity securities. The annual reporting period ends December 31. Assume the effective interest method of amortization of any discount or premium.

- **Amortization Schedule**
- **Journal Entries in 2020**
- **Financial Statement Presentation**
- **Journal Entries in 2021**

**Task:**
d. Indicate the effects of this investment on the 2020 income statement and year-end balance sheet.

**Note:** List accounts in alphabetical order.

### Income Statement 2020
- **Other Revenues and Gains**: $______

### Balance Sheet December 31, 2020
- **Assets**: $______

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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