On January 1, 2024, ABC Company issued $800,000 of its 20 year 10% bonds.

The bonds were priced to yield 8%

Interest is payable on June 30 and December 31.

ABC, Company records interest expense at the effective rate and elected the option to report these bonds at their fair value.

On June 30, 2024, the fair value of the bonds was $995,000 as determined by their market value in the over-the-counter market.

General (risk-free) interest rates decline created a $25,000 increase in fair value.

PV annuity: 5%, 40 = 17.15909

PV annuity: 4%, 40 = 19.79277

PV single sum: 5%, 40 = .14205

PV single sum: 4%, 40 = .20829

Required:

a) Determine the price of the bonds on January 1, 2024.

b) By how much will ABC Companys comprehensive income be increased or decreased by the bonds (ignoring taxes) in the December 31 annual financial statements? Prepare journal entry.