Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/17 12/31/18 12/31/19
Amortized cost $461,100 $550,200 $604,300
Fair value $466,500 $539,700 $604,300
(a) Indicate whether the bonds were purchased at a discount or at a premium.
Presented below is information taken from a bond i DiscountPremium
(b) Prepare the adjusting entry to record the bonds at fair value at December 31, 2017. 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, 2018.

a. The bonds are issued at discount

b. The required journal entry is provided below

Date              Account Titles and Explanation        Debit     Credit

31 Dec, 17     Fair value adjustment                         $4,400

                    (466,500 - 461,100 - 1,000)

                    Unrealized gain - Other                                       $4,400

                    comprehensive income

                    (To record unrealized gain)

c. The required journal entry is provided below

Date              Account Titles and Explanation      Debit       Credit

31 Dec, 18     Unrealized loss - Other                    $15,900

                     comprehensive income

                     Fair value adjustment                                        $15,900

                     (To record unrealized loss)

                     (550,200 - 539,700) + (4,400 + 1,000)