On January 1, 2021, Sage Hill Inc., a public company, purchased $490,000 of Pearl Corporations five-year, 5% bonds for $512,007 when the market interest rate was 4%. Interest is received semi-annually on July 1 and January 1. Sage Hills year-end is December 31. Sage Hill intends to hold Pearls bonds until January 1, 2026, the date the bonds mature. The bonds fair value on December 31, 2021, was $500,000

1. Record the purchase of the bonds on January 1, 2021.

2. Prepare the entry to record the receipt of interest on July 1, 2021.

3. Prepare the adjusting entry required on December 31, 2021.

4. Show the financial presentation of the bonds for Sage Hill on December 31, 2021, on partial balance Sheet

5. Prepare the entry to record the receipt of interest on January 1, 2022.

6. Prepare the entry to record the receipt on maturity of the bonds on January 1, 2026. Assume the entry to record the last interest payment has been recorded.

7. How would your answers to parts (a) through (c) change if the bonds were purchased for the purpose of trading? Journalise the transactions.