Manatee Company purchased $800,000 of long-term bonds on January 1, 2004 at face value. The bonds pay interest at an 8% annual rate on each June 30 and December 31. Semiannual payments were received, as promised, on June 30, 2004, and December 31, 2004. Manatee’s fiscal year ends December 31. At December 31, 2004, the market value of the bonds was $786,000. The bonds were sold on July 1, 2005 for $820,000.

(a) Show how the purchase of the bonds and the receipt of the first interest payment would be entered into the accounting system. Indicate how information about this bond investment will be reported on Manatee’s December 31, 2004, balance sheet if

(b) Management intends (and is able) to hold the bonds until maturity, or

(c) Management intends to hold the bonds for a few years and then sell them. Be sure to include the dollar amounts of any information that you suggest should be reported.