Splish Company invests $10,400,000 in 5% fixed rate corporatebonds on January 1, 2017. All the bonds are classified asavailable-for-sale and are purchased at par. At year-end, marketinterest rates have declined, and the fair value of the bonds isnow $11,078,000. Interest is paid on January 1.
Prepare journal entries for Splish Company to (a) record thetransactions related to these bonds in 2017, assuming Splish doesnot elect the fair option; and (b) record the transactions relatedto these bonds in 2017, assuming that Splish Company elects thefair value option to account for these bonds. (Creditaccount 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 theamounts.)
No. | Date | Account Titles and Explanation | Debit | Credit |
| (a) | Jan. 1, 2017Dec. 31, 2017 | | | |
| | | | |
| Jan. 1, 2017Dec. 31, 2017 | | | |
| | | | |
| | (To record interest revenue) | | |
| | | | |
| | | | |
| | (To record fair value adjustment) | | |
No. | Date | Account Titles and Explanation | Debit | Credit |
| (b) | Jan. 1, 2017Dec. 31, 2017 | | | |
| | | | |
| Jan. 1, 2017Dec. 31, 2017 | | | |
| | | | |
| | (To record interest revenue) | | |
| | | | |
| | | | |
| | (To record fair value adjustment) | |
