On January 1, 2016, the McMillan Corporation issued $ 86,000 par value, six- year bonds with a 0% stated interest rate. The discount on the bonds is amortized annually each December 31. The market rate of interest on the date of the bond issue was 3.25%. Below is the amortization table for the bond. Assume that McMillan elected the fair value option on the date of issue.

Required
Prepare the entry required to adjust the balance of the debt to fair value at the end of the first, second, and third years.

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Amortization Table Under Effective Interest Rate Method 0% Cash Interest Carrying 3.25% Effective Interest Discount Amortization Period 2.307 2,382 2.459 2,539 2,622 2,707 S 2,307 2,382 2,459 2,539 2,622 2,707 $15,016 Value $70,984 73,291 75,673 78,132 80,671 83,293 86,000 Fair Value $70,984 72.500 76,817 78,002 90,880 93,325 86,000 Total