Answer and Explanation:
The journal entries are shown below:
1. 11% bonds payable $336,270.95
To cash $336,270.95
(Being the bond purchased for cash is recorded)
2. Cash ($312,000 × 11%) $34,320
To Interest revenue ($336,270.95 × 9%) $30,264
To 11% bond payable $4,056
(Being the interest revenue is recorded)
Fair value adjustment $1,685.05
To Unrealized gain $1,685.05
(Being the recognition of fair value is recorded)
It is computed below:
= (333,900 - ($336,270.95 - $4,056) )
3. Unrealized gain $13,000 ($333,900 - $320,900)
To fair value adjustment $13,000
(Being the recognition of fair value is recorded)
