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Record the adjusting entry by west company on december

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

Required

Problem a. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method.

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

Problem c. Record the adjusting entry by West Company on December 31, 2020. The fair value of the bonds at Decem- ber 31, 2020, was $81,000.

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

Problem e. Record the receipt of interest on January 1, 2021.

Problem f. After the interest payment on July 1, 2021, two of the bonds were sold for $19,300 cash. Provide the re- quired entries on July 1, 2021.

Reference no: EM132740783

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