On December 28^th, 2020, Dambro Company acquired 800, $1,000, 9% bonds at 97%. The bonds will mature on May 30, 2035, with interest paid each May 31^st and November 30^th. The bonds will be added to held-to-maturity portfolio.

The fair value of this bond investment was set at 95%.

1- The entry to record the purchase of the bonds on December 28^th, 2020 would be:

Debit Credit

a. Investment in bonds................................................................... $776,000

Cash............................................................................ $776,000

b. Investment in bonds................................................................... 776,000

Premium on bonds investment.................................................... 24,000

Cash............................................................................ 800,000

c. Investment in bonds................................................................... 800,000

Discount on bonds Investment...................................... 24,000

Cash............................................................................ 776,000

d. Investments in bonds................................................................ 800,000

Cash ........................................................................... 800,000

e. None of the above

2- Assuming a fair value of $93,000 for these bonds On December 31, the journal

entry, if any, needed to adjust from the carrying value to fair value would be

Debit Credit

a. unrealized holding loss (Other comprehensive income)... $16,000

Fair value adjustment . $16,000

b. Fair value adjustment 16,000

Unrealized holding gain( Other comprehensive income) 16,000

c. Unrealizes holding loss(Income statement). 16,000

Fair value adjustment 16,000

.................................................................................

d. Fair value adjustment. 16,000

unrealized holding gain(Income statement) 16,000

e. None of the above