Question

Splish Company invests $10,400,000 in 5% fixed rate corporate bonds on January 1, 2017. All the bonds are classified as available-for-sale and are purchased at par. At year-end, market interest rates have declined, and the fair value of the bonds is now $11,078,000. Interest is paid on January 1.

Prepare journal entries for Splish Company to (a) record the transactions related to these bonds in 2017, assuming Splish does not elect the fair option; and (b) record the transactions related to these bonds in 2017, assuming that Splish Company elects the fair value option to account for these bonds. (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.)

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)

Answer 1