Accounting for Debt SecuritiesAvailable-for-Sale Hilo Company had the following transactions and adjustments related to a bond investment:

2019
Jan. 1	Purchased $800,000 face value of Cynad, Inc.s 9 percent bonds at 99 plus a brokerage commission of $1,400. The bonds pay interest on June 30 and December 31 and mature in 20 years. Hilo does not expect to sell the bonds in the near future, nor does it intend to hold the bonds to maturity.
June 30	Received the semiannual interest payment on the Cynad bonds and amortized the bond discount for six months. Hilo uses the straightline method to amortize bond discounts and premiums.
Dec. 31	Received the semiannual interest payment on the Cynad bonds and amortized the bond discount for six months.
Dec. 31	Made the adjusting entry to record the current fair value of the Cynad bonds. At December 31, the market value of the Cynad bonds was $790,000.
2020
June 30	Received the semiannual interest payment on the Cynad bonds and amortized the bond discount for six months.
July 1	Sold the Cynad bond investment for $792,500 cash.
Dec. 31	Made the adjusting entry to eliminate balances from the Fair Value Adjustment to Bond Investment account and the Unrealized Gain/Loss on Investments (Equity) account.

Record the transactions and adjustments of Hilo Company using journal entries.

General Journal
Date	Description	Debit	Credit
1/1/2019	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To record purchase of debt securities.
6/30/2019	Cash
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To record receipt of interest earned on debt securities.
12/31/2019	Cash
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To record receipt of interest earned on debt securities.
12/31/2019	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To adjust debt securities to year-end fair value.
6/30/2020	Cash
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To record receipt of interest and amortization of debt securities.
7/1/2020	Cash
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To record sale of debt securities.
12/31/2020	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	Bond interest incomeBond interest receivableBond investment-available for sale (Cynad)CashFair value adjustment to bond investmentGain on sale of investmentsLoss on sale of investmentsUnrealized gain/loss on investments (equity)
	To adjust account balances to zero.

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