Brass Company purchased $2,500,000 face value of QXR, Inc.s 9% bonds on January 2, 2015, at a price that yielded them an 8% return. The bonds mature on December 31, 2018, and pay interest semi annually each June 30 and December 31.
a. Assume that Brass Co. accounts for its investment using the amortized cost method. Complete the amortization table for the bond investment, and prepare journal entries to account for the bond through December 2016.
b. Now assume instead that Brass Co. has elected the fair value option for its investment in the QXR bonds. Complete the fair value adjustment schedule (and, optionally the T - accounts as well). Journalize only the additional adjusting entries required to mark the bonds to fair value at each interest payment date. Assume that the interest entries from part (a) have already been recorded.