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Prepare the adjusting entry to record these bonds at fair value.

P16-1A Davison Carecenters Inc. provides financing and capital
to the health-care industry, with a particular focus on nursing
homes for the elderly. The following selected transactions relate
to bonds acquired as an investment by Davison, whose fiscal year
ends on December 31. 2010 Jan. 1 Purchased at face value $2,000,000
of Hannon Nursing Centers, Inc., 10-year, 8% bonds datedJanuary 1,
2010, directly from Hannon. July 1 Received the semiannual interest
on the Hannon bonds. Dec. 31 Accrual of interest at year-end on the
Hannon bonds. (Assume that all intervening transactions and
adjustments have been properly recorded and that the number of
bonds owned has not changed fromDecember 31, 2010, toDecember 31,
2012.) 2013 Jan. 1 Received the semiannual interest on the Hannon
bonds. Jan. 1 Sold $1,000,000 Hannon bonds at 106. The broker
deducted $6,000 for commissions and fees on the sale. July 1
Received the semiannual interest on the Hannon bonds. Dec. 31
Accrual of interest at year-end on the Hannon bonds. Hint:
Journalize debt investment transactions and show financial
statement presentation. (SO 2, 5, 6) Instructions (a) Journalize
the listed transactions for the years 2010 and 2013. Gain on sale
of debt investment $54,000 (b) Assume that the fair value of the
bonds atDecember 31, 2010, was $2,200,000. These bonds are
classified as available-for-sale securities. Prepare the adjusting
entry to record these bonds at fair value. (c) Based on your
analysis in part (b), show the balance sheet presentation of the
bonds and interest receivable atDecember 31, 2010. Assume the
investments are considered long-term. Indicate where any unrealized
gain or loss is reported in the financial statements.