On July 1, 2020, West Company purchased for cash, twelve $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. d. Record the receipt of interest on January 1, 2021. e. Record the sale of all of the bonds on January 2, 2021, for $124,500. 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. Date Account Name Dr. Cr. d. Jan. 1, 2021 Answer Answer Answer Answer e. Jan. 2, 2021 Answer Answer Answer Answer Answer Answer f. Dec. 31, 2021 Answer Answer Answer Answer
On July 1, 2020, West Company purchased for cash, twelve $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. d. Record the receipt of interest on January 1, 2021. e. Record the sale of all of the bonds on January 2, 2021, for $124,500. 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. Date Account Name Dr. Cr. d. Jan. 1, 2021 Answer Answer Answer Answer e. Jan. 2, 2021 Answer Answer Answer Answer Answer Answer f. Dec. 31, 2021 Answer Answer Answer Answer
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 12MCQ: When the market value of a companys available-for-sale securities is lower than its cost, the...
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On July 1, 2020, West Company purchased for cash, twelve $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.
d. Record the receipt of interest on January 1, 2021.
e. Record the sale of all of the bonds on January 2, 2021, for $124,500.
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.
| Date | Account Name | Dr. | Cr. | |
|---|---|---|---|---|
| d. | Jan. 1, 2021 | Answer | Answer | |
| Answer | Answer | |||
| e. | Jan. 2, 2021 | Answer | Answer | |
| Answer | Answer | |||
| Answer | Answer | |||
| f. | Dec. 31, 2021 | Answer | Answer | |
| Answer | Answer |
Transcribed Image Text: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--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
N/A
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