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  3. pearl company loans novak company $2,200,000 at 6%

Pearl Company loans Novak Company $2,200,000 at 6% for 3 years on January 1,2025. Pearl...

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Accounting

Pearl Company loans Novak Company $2,200,000 at 6% for 3 years on January 1,2025. Pearl intends to hold this loan to maturity and
has the financial ability to do so. The fair value of the loan at the end of each reporting period is as follows.
December 31,2025$2,248,000
December 31,2026,2,220,000
December 31,2027,2,200,000
Prepare the joumal entries at December 31,2025, and December 31,2027, for Pearl related to these bonds, assuming (a) it does not
use the fair value option, and (b) it uses the fair value option. Interest is paid on January 1.(List all debit entries before credit entries. Credit
account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the
account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
No.
Date
Account Titles and Explanation
Debit
Cre
(a)
No.
Date
Account Titles and Explanation
Debit
Cre
(b)
(To record interest revenue)
(To record fair value adjustment)
(To record interest revenue)
(To record fair value adiustment)
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