On January 1, 2021, Hoist Up Company (HUC) purchased bonds of Southern Inc. that had the following characteristics: 12% coupon rate, $300,000 face value, maturing on December 31, 2025, and interest paid annually on December 31. The bonds were purchased by HUC for $311,087.69. The fair value of the bonds at December 31, 2021 was $320,500. The fair value of the bonds at December 31, 2022 was $309,800. The bonds are not considered to be impaired.

Refer to the given information above. Assume that HUC chooses to apply the FVOCI method in accounting for these bonds.

REQUIRED:

1. Prepare journal entries for the following dates: (a) January 1, 2021; (b) December 31, 2021; and (c) December 31, 2022.

2. As of December 31, 2022, what should be the balance of the FVOCI Bond Investment account and the balance of the Accumulated Other Comprehensive Income (AOCI) account?

3. Assume that on January 1, 2023, HUC sells the bonds for $309,700. Prepare the applicable journal entry for the sale.