Reference no: EM13788849
Investment in debt securities at premium.
Can someone please help me with part B. I cant figure out where they got the numbers from. I put the formula they used in the jounral entries but I cant figure out where they got 15,750, 63, and 19?
Also, did they get 4 from 4 years?
On April 1, 2014, West Company purchased $400,000 of 6% bonds for $415,750 plus accrued interest as an available-for-sale security. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2019.
Instructions (a) prepare the journal entry on April 1, 2014.
(b) The bonds are sold on November 1, 2015 at 103 plus accrued interest. Amortization was recorded when interest was received by the straight-line method (by months and round to the nearest dollar).
(a) Debt Investments .................................... 415,750
Interest Revenue ($400,000 .06 1/4) ........... 6,000
Cash ................................................................... 421,750
(b) Interest Revenue ($15,750 4 63) ............... 1,000
Debt Investments ............................................................. 1,000
Cash ($400,000 .06 1/3) ................................. 8,000
Interest Revenue ............................................................. 8,000
Cash ................................................................... 412,000
Gain on Sale of Investments ............................................ 1,000
Debt Investments ............................................................ 411,000 $415,750 [($15,750 63) 19]
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