On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $160,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.):

January 1, 2021	6.0	%
June 30, 2021	7.0	%
December 31, 2021	8.0	%

Required: 1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase. 2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds. 3. Prepare all appropriate journal entries related to the bond investment during 2021, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.

REQUIRED 1

Complete this question by entering your answers in the tabs below.

• Required 1
• Req 1 General Journal
• Required 2
• Required 3

Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees). (Do not round your intermediate calculations and round your final answer to nearest whole number.)

Bond fair value

$148,098

Req 1 General Journal

Prepare a journal entry to record the purchase. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole number.)

No	Trransaction	General Journal	Debit	Credit
1	1	Investment in bondsselected answer correct	160,000selected answer correct	not attempted
		Discount on bond investmentselected answer correct	not attempted	11,092selected answer incorrect
		Cashselected answer correct

Req 2

• Record the investment in bonds with a face value of $160,000, a stated interest rate of 5% and a market yield of 6%. The bonds pay interest semi-annually.

• 2

  Record the interest revenue.

• 3

  Record the fair value adjustment when the market yield is 7%.

• 4

  Record the interest revenue.

• 5

  Record the fair value adjustment when the market yield is 8%.

REQUIREMENT 3

• 1

  Record the investment in bonds with a face value of $160,000, a stated interest rate of 5% and a market yield of 6%. The bonds pay interest semi-annually.

• 2

  Record the interest revenue.

• 3

  Record the fair value adjustment when the market yield is 7%.

• 4

  Record the interest revenue.

• 5

  Record the fair value adjustment when the market yield is 8%.