Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are managed to profit from changes in market interest rates.

Instructions

(a) Indicate whether the bonds were purchased at a discount or at a premium.

(b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2015. The Fair Value Adjustment account has a debit balance of €1,000 prior to adjustment.

(c) Prepare the adjusting entry to record the bonds at fair value at December 31, 2016.

Transcribed Image Text:

12/31/15 12/31/16 Amortized cost Fair value 491,150 519,442 12/31/17 550,000 497,000 509,000 550,000