Pearl Company loans Novak Company $$2,200,000$ at $6\%$ for $3$ years on January $1,2025.$ Pearl 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 $31,2025$$$2,248,000$

December $31,2026,2,220,000$

December $31,2027,2,200,000$

Prepare the joumal entries at December $31,2025,$ and December $31,2027,$ for Pearl 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 $1.($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

Account Titles and Explanation

Debit

Cre

$($a$)$

No$.$

Date

Account Titles and Explanation

Debit

Cre

$($b$)$

$($To record interest revenue$)$

$($To record fair value adjustment$)$

$($To record interest revenue$)$

$($To record fair value adiustment$)$