On January 1, 2020, Pina Company purchased $ 290,000, 6% bonds of Aguirre Co. for $ 266,477. The bonds were purchased to yield 8% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Pina Company uses the effective-interest method to amortize discount or premium. On January 1, 2022, Pina Company sold the bonds for $ 267,985 after receiving interest to meet its liquidity needs.

(c)Prepare the journal entries to record the semiannual interest on (1) July 1, 2020, and (2) December 31, 2020.

(d)If the fair value of Aguirre bonds is $ 269,985 on December 31, 2021, prepare the necessary adjusting entry. (Assume the fair value adjustment balance on December 31, 2020, is a debit of $ 3,303.)

(e)Prepare the journal entry to record the sale of the bonds on January 1, 2022.

No.		Date	Account Titles and Explanation	Debit	Credit
(c)	(1)	July 1, 2020Dec. 31, 2020Dec. 31, 2021Jan. 1, 2022
	(2)	July 1, 2020Dec. 31, 2020Dec. 31, 2021Jan. 1, 2022
(d)		July 1, 2020Dec. 31, 2020Dec. 31, 2021Jan. 1, 2022
(e)		July 1, 2020Dec. 31, 2020Dec. 31, 2021Jan. 1, 2022

List of Accounts

Assistance Used

• Accumulated Other Comprehensive Loss
• Allowance for Doubtful Accounts
• Allowance to Reduce Inventory to Market
• Bad Debt Expense
• Bonds Payable
• Cash
• Call Option
• Common Stock
• Cost of Goods Sold
• Debt Investments
• Dividend Revenue
• Dividend Receivable
• Equity Investments
• Fair Value Adjustment
• Futures Contract
• Gain on Sale of Investments
• Gain on Settlement of Call Option
• Gain on Settlement of Put Option
• Interest Expense
• Interest Receivable
• Interest Revenue
• Inventory
• Investment Income
• Loss on Impairment
• Loss on Sale of Investments
• Loss on Settlement of Call Option
• Loss on Settlement of Put Option
• No Entry
• Notes Payable
• Paid-in Capital in Excess of Par - Common Stock
• Put Option
• Recovery of Loss from Impairment
• Retained Earnings
• Revenue from Investment
• Sales Revenue
• Swap Contract
• Unrealized Holding Gain or Loss - Equity
• Unrealized Holding Gain or Loss - Income