On January 1, 2022, Sohape Corporation issued $100,000 par value, 5-year bonds with a 3% stated 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 date of issue. Fair value changes are not the result of instrument-specific credit risk.

RequiredPrepare 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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Period 0 1 2345 3 ο Total Amortization Table under Effective Interest Rate Method 3% Cash Interest 2.50% Effective Interest Premium Amortization $ 3,000 3,000 3,000 3,000 3,000 $15,000 $ 2,558 2,547 2,536 2,524 2,512 $12,677 $ 442 453 464 476 488 $2,323 Carrying Value $102,323 101,881 101,428 100,964 100,488 100,000 Fair Value $102,323 102,970 102,160 102,099 102,067 100,000