Fair Value Accounting for Debt Investments (HTM, TS, and AFS) On July 1, 2022, Watson paid $42 million for bonds of Carnes Inc; the bonds have a face value of $58 million. The coupon rate on the bonds is 5% and the market rate of interest was 7% at the time of purchase. The bonds pay interest every June 30 and December 31. The market value of the bonds was $45 million at the end of 2022. Watson accounts for investments using the net method.

REQUIRED:

a) Assume that the bonds are held-to-maturity securities, prepare the journal entries for Watson Corporation to record the acquisition of the bonds on July 1 and the required entries on December 31 (the fiscal year end for Watson Corporation).

b) Assume that the bonds are held as trading securities, prepare the journal entries for Watson Corporation to record the acquisition of the bonds on July 1 and the required entries on December 31 (the fiscal year end for Watson Corporation).

c) Assume that the bonds are held as available-for-sale securities, prepare the journal entries for Watson Corporation to record the acquisition of the bonds on July 1 and the required entries on December 31 (the fiscal year end for Watson Corporation).

Use Straight-line amortization method