On January 1, 2010, AML Company issues bonds maturing in 5 years. The par value of the bonds is $100,000, the coupon rate is 8%, and the compounding period is semi-annually. The market initially prices these bonds using market interest rate 10% compounded semi-annually. The market interest rate on June 30, 2010 was 6%. On January 1, 2013, the company had excess cash and purchased back all the bonds. The market interest rate on January 1, 2013 was 12% (compounded semi-annually).

A. What is the net book value of bonds payable on January 1, 2013?

B. What is the market value of bonds on January 1, 2013?

C. Record journal entry on the retirement of bonds on January 1, 2013.

D. Assume the issuer elected the fair value option. On December 31, 2010, the effective rate is 9% due to change in credit risk. Record journal entry for fair value adjustment.

E. On December 31, 2011, the effective rate is 11% due to change in credit risk. Record journal entry for fair value adjustment.

F. On December 31, 2012, the effective rate is 14% due to change in credit risk. Record journal entry for fair value adjustment.