Assume the same facts as in Brief Exercise 14-16, except that Sharp Company does not intend to trade the bonds or to hold them until maturity.

a. Prepare the entry for the purchase of the debt investment on January \(1,2020\).

b. Prepare the entry for the receipt of interest on December \(31,2020\).

c. Record the entry to adjust the investment to fair value on December 31,2020 , if applicable.

Exercise 14-16

On January 1,2020 , Sharp Company purchased \(\$ 50,000\) of Sox Company \(6 \%\) bonds, at a time when the market rate was \(5 \%\). The bonds mature on December 31, 2024, and pay interest annually on December 31.

Sharp plans to and has the ability to hold the bonds until maturity. Assume that Sharp uses the effective interest method to amortize any premium or discount on investments in bonds. At December 31, 2020, the bonds are quoted at 98 .

a. Prepare the entry for the purchase of the debt investment on January 1, 2020.

b. Prepare the entry for the receipt of interest on December \(31,2020\).

c. Record the entry to adjust the investment to fair value on December 31, 2020, if applicable.