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

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, 2006. The Securities 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, 2007.

Transcribed Image Text:

12/31/06 12/31/07 12/31/08 Amortized cost Fair value $491,150 $519,442 $550,000 $499,000 $506,000 $550,000