(L01) (Debt Investments) Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale.

12/31/17 12/31/18 12/31/19 Amortized cost $491,150 $519,442 $550,000 Fair value 497,000 509,000 550,000 Instructions

(a) Indicate whether the bonds were purchased at a discount or at a premium.

(b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2017. The Fair Value Adjustment account has a debit balance of $1,000 prior to adjustment.

(c) Prepare the adjusting entry to record the bonds at fair value at December 31, 2018.