Novak Company invests $$10,400,000$ in $5\%$ fixed rate corporate bonds on January $1,2025.$ 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 $$10,981,000.$

Interest is paid on January $1.$

Prepare journal entries for Novak Company to $($a$)$ record the transactions related to these bonds in $2025,$ assuming Novak does not

elect the fair option; and $($b$)$ record the transactions related to these bonds in $2025,$ assuming that Novak Company elects the fair

value option to account for these bonds. $($List all debit entries before credit entries. 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. Record

journal entries in the order presented in the problem.$)$

No$.$

Date

$($a$)$

Account Titles and Explanation

Debit

Credit

$($To record interest revenue$)$

$($To record fair value adjustment$)$