Please answer both parts to problem below. Please be sure to show all calculations and answers to both parts!!

Problem 3 (30 Points)

At the end of 2018, Terry Company prepared the following schedule of investments in available-for-sale debt securities (all of which were acquired at par value):

Cumulative

Company

Amortized Cost

12/31/18 Fair Value

Change in Fair Value

Morgan Company $35,000 $34,200 $ (800)

Nance Company 50,000 53,100 3,100

Total $85,000 $87,300 $2,300

During 2019, the following transactions occurred:

July 1 Purchased Oscar Company debt securities with a par value of 100,000 for $98,000. The securities carry an annual interest rate of 10%, mature on December 31, 2021, and pay interest semiannually on July 1 and December 31. Terry uses the straight-line method to amortize any discounts or premiums.

Oct. 11 Sold all of the Morgan Company securities for $33,000 plus interest of $1,300. Dec. 31 Received interest of $6,000 on the Nance Company and Oscar Company debt securities, and the following year end total market values were available: Nance Company debt securities, $55,000; Oscar Company debt securities, $96,000.

Instructions:

1. Prepare journal entries to record the preceding information.

2. Show how the preceding items are reported on Terrys December 31, 2019, balance sheet. Assume all investments are noncurrent.