On September 30, 2021, Rittex, Inc., purchased 5% bonds of McPhee Corporation at 97 as a long-term, held-to-maturity investment. The maturity value of the bonds will be $46,000 on September 30, 2026. The bonds pay interest on March 31 and September 30. Rittex’s fiscal year end is December 31. 

Requirements 

1. What method should Rittex use to account for its investment in the McPhee Corp. bonds?

2. Using the straight-line method of amortizing the discount on bonds, journalize all of Rittex’s transactions on the bonds for 2021.

3. Show how Rittex would report everything related to the bond investment on its balance sheet at its year-end, December 31, 2021.