On January 1, 2021, Rice Company purchased 5% bonds having a maturity value of $250,000. The bonds provide the bondholders with a 4.6% yield. They are dated January 1, 2021, and mature December 31, 2025, with interest received on December 31 of each year. On December 31, 2021, the bonds were trading in the open bond market at a price of 99.8. Rice Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified as available-for-sale.

Instructions

1. Record the journal entry for the purchase of the bonds on January 1, 2021.
2. Record the journal entry to recognize interest revenue for the year ended December 31, 2021.
3. If necessary, record the journal entry to recognize the change in value as of December 31, 2021. If no entry is necessary, indicate N/A.