On January 1, 2019 Forbes Ltd. purchased $900,000 of Cotton Company 6% bonds. The bonds pay semi-annual interest each June 30 and December 31. The market rate was 5% on the date of purchase. The bonds mature on December 31, 2025.

Required:

Calculate the price paid by Forbes Inc. for the Cotton Bonds. Round to the nearest dollar. (1 Mark)

Assuming the bond is classified as an AC (amortized cost) investment, construct an amortization schedule to include all transactions for the year 2019. (2 Marks)

Prepare the journal entries for 2019, based on your calculations in requirement 2. Forbes has a December 31, 2019 year end. (4 Marks)

Assume instead that the bonds are classified as a FVOCI investment and at December 31, 2019 the fair value of the bonds was 936,000. Prepare the journal entry to record the change in fair value. (2 Marks)