Delaware Company purchased a long-term investment $200 million of 5% bonds, dated January 1, on January 1, 2021. Management classified the investment as Available-for-Sales. For bonds of similar risk and maturity the market yield was 6%. The price paid for the bonds was $180 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds on December 31, 2021, was $178 million.

Requirements:

1. Prepare the journal entry at the initial purchase date on January 1, 2021 (2 Points).

2. Please fill in the amortization schedule below by Dec 31, 2021 (6 Points).

Date	Cash (Stated) Interest	Effective (market) Interest	Amortization of discount or premium	Balance of discount or premium	Amortized cost
Jan. 1, 2021
June 30, 2021
Dec. 31, 2021

3. According to your numbers filled in the amortization schedule above, please prepare journal entry on Dec. 31, 2021, when Delaware Company received the interest payment (2 Points).

4. At what amount will Delaware Company report its investment in the December 31, 2021 balance sheet? Please prepare any adjusting entry if necessary. (3 Points)

5. Company decides to sell the investment on January 10, 2022, because the market price continuously drops. On January 10, 2022, the market price drops to $177. Please prepare the THREE journal entries of sales transaction on January 10, 2022. (6 Points)

6. Suppose Delaware Company originally classified this investment as held-to-maturity, at what amount will Texas Technologies report its investment in the December 31, 2021, balance sheet? Please prepare any journal entry necessary if necessary. (1 Point)