Ayayai Company loans Sarasota Company $1,830,000 at 6% for 3 years on January 1, 2017. Ayayai intends to hold this loan to maturity. The fair value of the loan at the end of each reporting period is as follows.

December 31, 2017		$1,885,000
December 31, 2018		1,852,000
December 31, 2019		1,830,000

Prepare the journal entry(ies) at December 31, 2017, and December 31, 2019, for Ayayai 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.

#	Date	Account Title	Debit	Credit
(a)
x
(a)
x
(b)
x
x		(To record interest revenue)
(b)
x
x		(To record fair value adjustment)
(b)
x
x		(To record interest revenue)
(b)
x
x		(To record fair value adjustment)

ACCOUNTS:

Accumulated Other Comprehensive Loss

Allowance for Loss on Debt Investment

Bonds Payable Cash Call Option Common Stock Cost of Goods Sold Debt Investments Dividend Revenue Dividend Receivable Equity Investments Fair Value Adjustment Futures Contract Gain on Sale of Investments Gain on Settlement of Call Option Gain on Settlement of Put Option Interest Expense Interest Receivable Interest Revenue Inventory Investment Income Loss on Impairment Loss on Sale of Investments Loss on Settlement of Call Option Loss on Settlement of Put Option No Entry Notes Payable Paid-in Capital in Excess of Par - Common Stock Put Option Recovery of Loss from Impairment Retained Earnings Sales Revenue Swap Contract Unrealized Holding Gain or Loss - Equity Unrealized Holding Gain or Loss - Income