Question: sodding Reporting Bonds Using the Fair Value Option Royal Inc holds 10-year, $110.000, 10% annual interest-bearing bends with a carrying value of $97,000 as

sodding Reporting Bonds Using the Fair Value Option Royal Inc holds 10-year,

sodding Reporting Bonds Using the Fair Value Option Royal Inc holds 10-year, $110.000, 10% annual interest-bearing bends with a carrying value of $97,000 as of December 31,2020. Royal Inc amortizes the discount using the effective interest method. At the time the bonds were issued on June 30, 2020, Royal Inc. elected to account for the bonds using the fair value option, in preparing financial statements for 2020, Royal Inc. will need to make an adjusting entry to reflect the change in the fair value of the bonds Required Assume that the fair value of the $110,000 bonds is $88,000 on December 31, 2020 The decrease in fair value is due to general interest rate changes Recond the adjusting entry on December 31,28201 Assume instead that the fair value of the $110.000 bonds is $104,500 on December 31, 2020. The increase in the fair value of the bonds is due entirely to a change in the credit risk of the debt Record the adjusting entry on December 31, 2020 Date Account Name Dec 1, 2020 Fay Vaux Adjustment-Bonds Payable Bonds 11. 2020 Value Adjustment-Beds Payable Bonds Peyale 000 104500 N 104.500

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