On July 1 of the current year, West Company purchased for cash, 40, $10,000 bonds of...

 

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On July 1 of the current year, West Company purchased for cash, 40, $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 in three years on July 1. 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. Note: When answering the following questions, round answers to the nearest whole dollar. Journal Entries in Year 1. Journal Entries in Year 2 Amortization Schedule b. Record the entry for the purchase of the bonds by West Company on July 1. Date Jul. 1, Year 1 Date Dec. 31, Year 1 Account Name Dec. 31, Year 1 To record investment purchase. Account Name c. Record the adjusting entries by West Company on December 31 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on that date was $415,000. To accrue interest revenue. Debit To record unrealized gain or loss. 0 0 Debit 0 OOO OO 0 0 0 Credit 0 0x 0x Credit 0 x 0x 0x 0x 0x On July 1 of the current year, West Company purchased for cash, 40, $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 in three years on July 1. 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. Note: When answering the following questions, round answers to the nearest whole dollar. Journal Entries in Year 1. Journal Entries in Year 2 Amortization Schedule b. Record the entry for the purchase of the bonds by West Company on July 1. Date Jul. 1, Year 1 Date Dec. 31, Year 1 Account Name Dec. 31, Year 1 To record investment purchase. Account Name c. Record the adjusting entries by West Company on December 31 to accrue interest revenue and record the unrealized gain or loss. The fair value of the bonds on that date was $415,000. To accrue interest revenue. Debit To record unrealized gain or loss. 0 0 Debit 0 OOO OO 0 0 0 Credit 0 0x 0x Credit 0 x 0x 0x 0x 0x