Question

Exercise 14-19 Marin Company commonly issues long-term notes payable to its various lenders. Marin has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Marin has elected to use the fair value option for the long-term notes issued to Barday's Bank and has the following data related to the carrying and fair value for these notes. Any changes in fair value are due to changes in market rates, not credit risk. December 31, 2020 December 31, 2021 December 31, 2022 Carrying Value $48,700 42,900 32,400 Fair Value $48,700 41,300 34,600 (a) Prepare the journal entry at December 31 (Marin's year-end) for 2020, 2021, and 2022, to record the fair value option for these notes. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts.Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Date Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2022

Answer 1

a Journal Entry Answer General Journal Debit Credit Date --No Entry Dec, 31 2020 Dec, 31 2021 Notes Payable $1,600 $1,600 Unrealized Holding Gain or Loss - Income (To record the unrealized gain or loss) Dec, 31 2022 Unrealized Holding Gain or Loss - Income $3,800 $3,800 Notes Payable (To record the unrealized gain or loss) b Notes Payable to be reported on Marin's 2021 Balance Sheet is $41,300 c The effect of recording the fair value option would result in unrealized holding loss of $3,800 Explanation Change in Unrealized Unrealized Carrying Fair Year Ending Holding Gain or Loss Value Value Holding Gain or Loss $48,700 $48,700 $0 $0 2020 $42,900 $41,300 $1,600 $1,600 2021 $32,400 $34,600 ($3,800) ($2,200) 2022