Brief Exercise 17-2

Stellar Company purchased, on January 1, 2017, as an available-for-sale security, $88,000 of the 12%, 5-year bonds of Chester Corporation for $81,958, which provides an 14% return. Prepare Stellars journal entries for (a) the purchase of the investment, (b) the receipt of annual interest and discount amortization, and (c) the year-end fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) The bonds have a year-end fair value of $83,600