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On January 1, 2020, Pina Colada Limited paid $543,286.50 for 12% bonds with a maturity value of $505,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature on January 1, 2025, with interest receivable on December 31 of each year. Pina Colada applies ASPE using the effective interest method, and has a December 31 year end. Assume that Pina Colada hopes to make a gain on the bonds as interest rates are expected to fall. Pina Colada accounts for the bonds at fair value with changes in value taken to net income, and separately recognizes and reports interest income. The fair value of the bonds at December 31 of each year end is as follows:

2020 $539,500.00

2021 $520,150.00.

2022 $518,130.00

2023 $512,070.00.

2024 $505,000.00

1. Prepare the journal entry at the date of the bond purchase.

2. Prepare the journal entries to record interest income and interest received and recognition of fair value at December 31, 2020, 2021, and 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. (Round answers to 2 decimal places, e.g. 52.75.) Date Account Titles and Explanation Debit Credit (To record interest collected) (To record fair value adjustment) (To record interest collected) (To record fair value adjustment) (To record interest collected) (To record gain or loss)

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