1. Record all journal entries for the first year (3/1/x1 - 12/31/x1) on the books of the investor under the assumption that the investor plans to hold the investment until maturity (i.e., reports the investment at amortized cost). Hint: Do not use a premium or discount account. Amortize discounts and premiums as a direct adjustment to the Investment in Bonds account. 2Describe what the investor will report (give category and dollar amounts) in the balance sheet and income statement at 12/31/x1.

Cash Flow	Amount	PV Factor	Present Value
Maturity Value	$10,000	0.55368	$5,537
Interest Payment	$350	14.87747	$5,207
Issue Price			$10,744
Item	Amount
Total Int paid over the 10 year period	7,000
Premium on the Bond	744
Total Int Exp over the 10 year period	6,256
Six Month Period	BEG Loan Bal	Appropriate Int rate	Interest Expense	Interest Paid	Premium Amort
1	10,744	3%	322	350	28
2	10,716	3%	321	350	29
Column Total			6,256	7,000	744

Payment at 9/1/X1
Interest Exp	322
Premium on Bonds Payable	28
Cash		350
Adjusting Entry at 12/31/X1
Interest expense	214
Premium on Bonds Payable	19
interest payable		233
Liability balance at 12/31/x1
Bonds payable		10,000
premium: BEG balance	744
Amortization	28
	19	697
Total		9,303
For interest payable	233
income statement - 20x1
first 6 months	$322
last 4 months	$214
total	$536