Presented below is information taken from a bond investment amortization schedule with related fair values provided. these bonds are classified as available-for-sale. 12/31/20 12/31/21 12/31/22 amortized cost $472200 $543100 $597900 fair value $478400 $532100 $597900 (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, 2020. the fair value adjustment account has a debit balance of $900 prior to adjustment. (c) prepare the adjusting entry to record the bonds at fair value at december 31, 2021.

(a) The bonds are issued at a discount.

(b) The required journal entry is as follows:

On December 31, 2020

Fair value adjustment {($478400-$472200) - $900} A/c     Dr. $5,300

To Unrealized gain- other comprehensive income                               $5,300

(To record unrealized gain)

(c) The required journal entry is as follows:

On December 31, 2021

Unrealized loss- other comprehensive income:

=  (amortized cost - fair value) + (Unrealized gain + Debit balance prior to adjustment)

= ($543,100 - $532,100) + ($5,300 + $900)

= $17,200

The required journal entry is as follows:

Unrealized gain- other comprehensive income A/c     Dr. $17,200

To Fair value adjustment                                                                      $17,200

(To record unrealized loss)

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