On 4/30, Year 8, a corporation purchases a $10,000, 8% stated rate bond for $9,652 (i.e., at 96.52) plus accrued interest of $267. The market rate or yield on the bond is 9.50%. It is accounted for as an AFS investment. The bonds mature on 12/31, Year 10. The following fair values are for the dates indicated:

12/31/Yr 8	$9,820
12/31/Yr 9	$9,975
12/31/Yr 10	$10,000

Even though the investment is appropriately accounted for as AFS, the investor holds the bond until maturity date. Thus, the bond is settled at 12/31, Year 10, at its maturity value of $10,000, which is also its fair value on that date.

Complete the amortization table below, rounding to the nearest whole dollar after each calculation.

	Debit	Credit	Debit
Date	8.00% CASH Interest	9.50% INTEREST INCOME	INVEST - AFS, Amort. of Discount	Amortized Carrying Value	Fair Value	Fair Value Adjustment
4/30/Yr 8
6/30/Yr 8	133	( x _____ % x 2 / 12 ) =	20
12/31/Yr 8		( x _____ % x __ / __ ) =			9,820	=
6/30/Yr 9		( x _____ % x __ / __ ) =
12/31/Yr 9		( x _____ % x __ / __ ) =			9,975	=
6/30/Yr10		( x _____ % x __ / __ ) =
12/31Yr. 10		Plug due to rounding 474	Plug 74	10,000	10,000	= 0
Totals	2,133	2,481	348

Post the appropriate amounts to the t-accounts below:

UNREAL. G/L OCI FAIR VALUE ADJUSTMENT

		4/30/Yr 8	0		4/30/Yr 8	0
		12/31/Yr 8			12/31/Yr 8
		12/31/Yr 9			12/31/Yr 9
12/31/Yr 10	117						12/31/Yr 10	117
		12/31/Yr 10	0		12/31/Yr 10	0

Record the journal entries on the next page.

Journal Entries:

4/30/Yr 8	INVESTMENT IN AFS - DEBT
	INTEREST RECEIVABLE	267
	CASH
6/30/Yr 8	CASH
	INVESTMENT IN AFS - DEBT
	INTEREST RECEIVABLE
	INTEREST INCOME
12/31/Yr 8
12/31/Yr 8
6/30/Yr 9
12/31/Yr 9
12/31/Yr 9
6/30/Yr 10
12/31/Yr 10
	Maturity of the bond:
12/31/Yr 10	UNREALIZED GAIN OR LOSS OCI	117
	FAIR VALUE ADJUSTMENT		117
	CASH	10,000
	INVESTMENT IN AFS - DEBT		10,000