investments. part b only

E9.5 (LO 3) (FV-NI Investment in Bonds) Refer to the information in E9.3, except assume that Mustafa hopes to make a gain on the bonds as interest rates are expected to fall. Mustafa accounts for the bonds at fair value with changes in value taken to net income, and separately recognizes and reports interest income. The fair value of the bonds at December 31 of each year end is as follows: 2020 2021 2022 $534,200 $515,000 $513,000 2023 2024 $507,000 $500,000 Instructions b. Prepare the journal entries to record interest income and interest received and recognition of fair value at December 31, 2020, 2021, and 2022. E9.3 (LO 2) (Entries for Cost/Amortized Cost Investments) On January 1, 2020, Mustafa Lim ited paid $537,907.40 for 12% bonds with a maturity value of $500,000. The bonds provide the bondhold- ers with a 10% yield. They are dated January 1, 2020, and mature on January 1, 2025, with interest receiv. able on December 31 of each year. Mustafa accounts for the bonds using the amortized cost approach, applies ASPE using the effective interest method, and has a December 31 year end. Instructions a. Prepare the journal entry to record the bond purchase. b. Prepare a bond amortization schedule, rounding to two decimal places. c. Prepare the journal entry to record interest received and interest income for 2020. d. Prepare the journal entry to record interest received and interest income for 2021. e. Prepare the journal entry to record the redemption of the bond at maturity. f. If Mustafa used the straight-line method of discount/premium amortization, prepare the journal entry to record interest received and interest income the company would make each year. g. Compare the total interest income reported over the five-year period under the effective interest method and the straight-line method. What can you conclude? h. Digging Deeper Why might a reader of the financial statements find the effective interest method more relevant than the straight-line method