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, 2022. 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, 2023.

d. Repeat the requirements for (c), assuming the investments are held under a held-for-collection and selling strategy.

Transcribed Image Text:

12/31/22 12/31/23 12/31/24 Amortized cost $491,150 $519,442 $550,00 Fair value 497,000 509,000 550,000