On January 1, 2017, Pharoah Company purchased 12% bonds, havinga maturity value of $320,000, for $344,260.74. The bonds providethe bondholders with a 10% yield. They are dated January 1, 2017,and mature January 1, 2022, with interest received on January 1 ofeach year. Pharoah Company uses the effective-interest method toallocate unamortized discount or premium. The bonds are classifiedas available-for-sale category. The fair value of the bonds atDecember 31 of each year-end is as follows. 2017 $342,000 2020$330,700 2018 $329,700 2021 $320,000 2019 $328,700 (a) Prepare thejournal entry at the date of the bond purchase. (b) Prepare thejournal entries to record the interest revenue and recognition offair value for 2017. (c) Prepare the journal entry to record therecognition of fair value for 2018.
