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Sierra River Corp. purchased $1,000,000 10-year bonds at 96 ($960,000) when the market yield was 8%. The bonds pay interest at the rate of 6% annually on December 31. At year-end, the bonds were trading at 96.5.

Requirements:

1. If the bonds are held to maturity, prepare the year-end journal entry using the Straight-Line Amortization method. Indicate each account category, for example, Cash (A+).
2. If the bonds are not-held-to maturity and kept at Trading Securities, prepare the year-end journal entry using the Fair Value method. Indicate each account category, for example, Cash (A+).
3. If the bonds are not-held-to maturity and kept as Available-for-Sale Securities, prepare the year-end journal entry using the Fair Value method. Indicate each account category, for example, Cash (A+).