On January 1, 2018, Sohape Corporation issued $100,000 par value, 5-year bonds with a 3% slated interest rate. Interest is paid annually each December 31. The market rate of interest on the date of the bond issue was 2.5%. The amortization table for the bond follows. Assume that Sohape elected the fair value option on the dare or issue. Fair value changes are not the result of instrument-specific credit risk.

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 3% Cash Interest Carrying Value 2.50% Effective In terest Premium Amortization Fair Value Period $102, 323 $102,323 $ 3,000 3,000 $ 2,558 2,547 $ 442 102,970 102,160 101,881 453 464 476 101,428 100.964 100 488 2,536 2,524 3,000 102.099 102,067 3,000 100 000 3,000 2.512 488 100 000 $12,677 $2, 323 Total $15,000