Macy's purchased AAA's 10-year, $100,000 bond with a 7% interest rate and a 10% yield, purchased on December 31, 2020, for $81,566. The following schedule presents the fair value of the bonds at year-end.

12/31/21 12/31/22 12/31/23 12/31/24 12/31/25

Fair value 80,000 90,000 88,000 82,000 88,000

Assume the bonds are classified as available-for-sale investment.

Instructions:

1.Prepare an amortization table for this investment for years 2021, 2022, and 2023.

2. Prepare the journal entries related to the available-for-sale bonds for 2022.

3. Prepare the journal entries related to the available-for-sale bonds for 2023.