Question

Question 26 Martinez Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 10% and has a carrying value of $15,000. At year-end, Martinez’s borrowing rate (credit risk) has declined; the fair value of the note payable is now $16,300. Determine the unrealized holding gain or loss on the note. (Enter loss using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Unrealized Holding Gain or Loss $ Prepare the entry to record any unrealized holding gain or loss. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Answer 1

a.

Determine the unrealized holding gain or loss on the note as follows:

Unrealized holding loss = Fair value - Book value

Unrealized holding loss = 16300 - 15000

Unrealized holding loss = $ 1300

b.

Entry to record Unrealized holding gain or loss:

Accounts name	Debit	Credit
Unrealized holding gain or loss - Equity	1300
N/P		1300