(Entries for Available-for-Sale Securities) Assume the same information as in E16.3 except that the securities are classified as available-for-sale. The fair value of the bonds at December 31 of each year-end is as follows.

2025	$320,000
2026	$309,000
2027	$308,000
2028	$310,000
2029	$300,000

Instructions

a. Prepare the journal entry at the date of the bond purchase.

b. Prepare the journal entries to record the interest revenue and recognition of fair value for 2025.

c. Prepare the journal entry to record the recognition of fair value for 2026.

E16.3 Carow Corporation purchased on January 1, 2025, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carows journal entries for (a) the purchase of the investment, and (b)the receipt of semiannual interest and premium amortization. Assume effective-interest amortization is used.