On July 1, 2020, West Company purchased for cash, four $10,000 bonds of North Corporation at a market rate of 4%. 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 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 Premium 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 Total Answer Answer Answer b. Record the entry for the purchase of the bonds by West Company on July 1, 2020. c. Record the adjusting entries by West Company on December 31, 2020 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on December 31, 2020, was $49,800. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Date Account Name Dr. Cr. b. Jul. 1, 2020 Answer Answer c. Dec. 31, 2020 Answer Answer Answer Dec. 31, 2020 Answer Answer d. Record the receipt of interest on January 1, 2021. e. Record the sale of all of the bonds on January 2, 2021, for $49,800. f. Record the adjustment to the Fair Value Adjustment account on December 31, 2021, assuming no additional TS investments. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

On July 1, 2020, West Company purchased for cash, four $10,000 bonds of North Corporation at a market rate of 4%. 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 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 Premium 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 Total Answer Answer Answer b. Record the entry for the purchase of the bonds by West Company on July 1, 2020. c. Record the adjusting entries by West Company on December 31, 2020 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on December 31, 2020, was $49,800. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). Date Account Name Dr. Cr. b. Jul. 1, 2020 Answer Answer c. Dec. 31, 2020 Answer Answer Answer Dec. 31, 2020 Answer Answer d. Record the receipt of interest on January 1, 2021. e. Record the sale of all of the bonds on January 2, 2021, for $49,800. f. Record the adjustment to the Fair Value Adjustment account on December 31, 2021, assuming no additional TS investments. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: Round each amount to the nearest whole dollar. Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 5MC

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Question

Amortization Schedule

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	Premium 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
Total	Answer	Answer	Answer

b. Record the entry for the purchase of the bonds by West Company on July 1, 2020.

c. Record the adjusting entries by West Company on December 31, 2020 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on December 31, 2020, was $49,800.

Note: List multiple debits or credits (when applicable) in alphabetical order.

Note: Round each amount to the nearest whole dollar.

Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

	Date	Cr.
b.	Jul. 1, 2020	Answer
		Answer
c.	Dec. 31, 2020	Answer
		Answer
		Answer

	Dec. 31, 2020	Answer
		Answer

d. Record the receipt of interest on January 1, 2021.

e. Record the sale of all of the bonds on January 2, 2021, for $49,800.

f. Record the adjustment to the Fair Value Adjustment account on December 31, 2021, assuming no additional TS investments.

Note: List multiple debits or credits (when applicable) in alphabetical order.

Note: Round each amount to the nearest whole dollar.

Note: If a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

	Date	Dr.	Cr.
d.	Jan. 1, 2021	Answer	Answer
		Answer	Answer
e.	Jan. 2, 2021	Answer	Answer
		Answer	Answer

	Jan. 2, 2021	Answer	Answer
		Answer	Answer
		Answer	Answer

f.	Dec. 31, 2021	Answer	Answer
		Answer	Answer

Cash
Interest Receivable
Investment in TS
Fair Value Adjustment--TS
Investment in AFS Securities
Fair Value Adjustment--AFS
Investment in 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--0CI
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
N/A

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