Presented below is selected information related to the financial instruments of Dawson Company at December 31, 2017. This is Dawson Companys first year of operations.

		Carrying Amount		Fair Value (at December 31)
Investment in debt securities (intent is to hold to maturity)		$40,000		$41,000
Investment in Chen Company stock		800,000		910,000
Bonds payable		220,000		195,000

1. (a) Dawson elects to use the fair value option for these financial instruments (the fair value option for financial liabilities is discussed in Chapter 14). Assuming that Dawsons net income is $100,000 in 2017 before reporting any securities gains or losses, determine Dawsons net income for 2017 (assume that the difference between the carrying value and fair value is due to credit deterioration. Dawson's net income for 2017 ____

1. B= Record the journal entry, if any, necessary at December 31, 2017, to record the fair value option for the bonds payable.

2.

Exercise 17-22 (Part Level Submission)

Elaina Company has the following investments as of December 31, 2017:

Investments in common stock of Laser Company		$1,500,000
Investment in debt securities of FourSquare Company		$3,300,000

In both investments, the carrying value and the fair value of these two investments are the same at December 31, 2017. Elainas stock investments does not result in significant influence on the operations of Laser Company. Elainas debt investment is considered held-to-maturity. At December 31, 2018, the shares in Laser Company are valued at $1,100,000; the debt investment securities of FourSquare are valued at $2,500,000. Assume that these investments are considered impaired.

1. Prepare the journal entries for these two securities at December 31, 2018, assuming that they are permanently impaired.