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, 2020. 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, 2021.

Transcribed Image Text:

12/31/20 12/31/21 12/31/22 Amortized cost Fair value $491,150 497,000 $519,442 509,000 $550,000 550,000