On January 1, 2017, Buffalo Company purchased 12%bonds, having a maturity value of $ 304,000, for $ 327,047.70. Thebonds provide the bondholders with a 10% yield. They are datedJanuary 1, 2017, and mature January 1, 2022, with interest receivedon January 1 of each year. Buffalo Company uses theeffective-interest method to allocate unamortized discount orpremium. The bonds are classified as available-for-sale category.The fair value of the bonds at December 31 of each year-end is asfollows.
| 2017 | | $ 324,800 | | 2020 | | $ 313,800 |
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| 2018 | | $ 312,700 | | 2021 | | $ 304,000 |
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| 2019 | | $ 311,800 | | | | |
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| (a) | | Prepare the journal entry at the date of the bondpurchase. |
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| (b) | | Prepare the journal entries to record the interest revenue andrecognition of fair value for 2017. |
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| (c) | | Prepare the journal entry to record the recognition of fairvalue for 2018. |
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(Round answers to 2 decimal places, e.g. 2,525.25.Credit account titles are automatically indented when amount isentered. Do not indent manually. If no entry is required, select"No Entry" for the account titles and enter 0 for theamounts.)
