4.) Santos Company loans Sarasota Company $1,810,000 at 7% for 3 years on January 1, 2020. Ivanhoe 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, 2020 $1,859,000 December 31, 2021 1,831,000 December 31, 2022 1,810,000 Prepare the journal entry(ies) at December 31, 2020, and December 31, 2022, for Santos 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. (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) No. Date Account Titles and Explanation Debit Credit (b) (To record interest revenue) (To record fair value adjustment) (To record interest revenue) (To record fair value adjustment)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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4.) Santos Company loans Sarasota Company $1,810,000 at 7% for 3 years on January 1, 2020. Ivanhoe 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, 2020		$1,859,000
December 31, 2021		1,831,000
December 31, 2022		1,810,000

Prepare the journal entry(ies) at December 31, 2020, and December 31, 2022, for Santos 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. (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)

No.	Date	Account Titles and Explanation	Debit	Credit
(b)

		(To record interest revenue)


		(To record fair value adjustment)


		(To record interest revenue)


		(To record fair value adjustment)

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