$$

$$

$=0$

$$

$x$

$$

$$

PROBLEM II $-$ Bonds and FVTOCI Investment $(20$ Points$)$:

Company A $($the issuer$)$ issued $$3,000,000$ of $5-$year corporate bonds with a $9\%$ coupon rate and an $8\%$ market interest rate at the beginning of year $x1$ at a price of $$3,119,781.$ Interest is paid annually on December $31,$ and the premium on the bonds is amortized using the effective interest rate method.

Company B $($the investing company$)$ purchased these bonds in full at the beginning of year X$1$ with the intention of holding them to collect principal and interest and to sell them opportunistically. The fair value of the bond at the end of year $x1$ was $$3,100,000.$ The fair value of the bond at the end of year X$2$ was $$3,050,000.$ Company B sold all of the bonds for $$3,060,000$ at the end of year X$3.$

Required:

Prepare the journal entries for the debtor $($Company A$)$ and the creditor $($Company B$)$ from year X$1$ to X$3.$