Problem $1(25\%)$

On January $1,2018,$ Ambrosia Corp. purchased $7\%5-$year bonds with face value of $$600,000.$ The bonds were dated January $1,2018,$ and would mature on January $1,2023.$ The bonds would pay interest twice a year, on July $1$ and January $1.$ Ambrosia paid $$652,513$ for the bonds to yield $5\%($market rate$).$ Ambrosia accounted for the bonds at FV$-$OCI. Ambrosia's fiscal year end was December $31.$ Fair values of the bonds on December $31,2018$ and $2019$ respectively were:

$2018,$$$625,648$

$2019,$$$699,408$

a$.$ Prepare a table to show interest income, interest received and premium or discount amortization for the bonds for the first $3$ years. $(7$ marks$)$

b$.$ Prepare all necessary journal entries in $2018,$ to record interest income and an adjustment to fair value. $(9$ marks$)$

c$.$ The bonds were sold on July $1,2020$ at $112,$ immediately after collecting interest due on that date. Prepare all necessary joumal entries for the sale of the bonds. $(9$ marks$)$