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A corporation purchases 200 $1,000 bonds on 5/1, Year 6, at 103.922 [percent of face value], (plus accrued interest) semiannual interest is paid on 6/30 and 12/31 each year. The stated rate is 8% and the yield 7%. The bond matures on 12/31, Year 10. It is accounted for as an AFS investment.

Market values:	12/31/Yr 6	105, 105% X the face value
	12/31/Yr 7	107

Cash paid to acquire the bond:
Bond price __________ x $1,000 x __________ % =		$
Accrued interest: ( $____________ x _______% x ____ / 12 ) =	+
Total cash paid to acquire the bond	=	$

Semi-annual interest payment: ( $_____________ x ____% x __ / 12 ) = $__________

Amortization schedule:

Prepare the following amortization schedule for the dates indicated, rounded to nearest dollar.

Date	Interest payment	Interest income	Amortization of premium	Carrying value of bond investment	Fair value
5/1/Yr 6
6/30/Yr 6		( x 7% x __ / __) =
12/31/Yr 6		( x 7% x 1/2) =
6/30/Yr 7		( x 7% x 1/2) =
12/31/Yr 7		( x 7% x 1/2) =

UNREAL. G/L OCI FAIR VALUE ADJUSTMENT

		5/1/Yr 6	0		5/1/Yr 6	0
		12/31/Yr 6			12/31/Yr 6
		12/31/Yr 7			12/31/Yr 7

Record journal entries on the next page.

Journal Entries:

5/1/Yr 6
6/30/Yr 6
12/31/Yr 6
6/30/Yr 7
12/31/Yr 7

Check figures: 12/31, Year 7, carrying value at amortized cost is $205,322. The FVA at 12/31, Year 7, is $8,678.

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