Using the information provided in BE16- 2, prepare the entry to record the fair value adjustment if Kuban classified this investment as a trading security.
In BE16-2
Kuban Company acquired $ 3,500,000 face value, 8% bonds as an available- for- sale investment on January 1 of the current year when the market rate of interest was 10%. Inter-est is paid annually each December 31. Kuban purchased the bonds, which mature in 12 years, for $ 3,023,042. Kuban amortizes the discount using the effective interest rate method. The fair value of the bonds at the end of the year is $ 3,000,000. Prepare the journal entries required on the date of acquisition and at the end of the first year after acquisition.