Pierre Company has a 12% note payable with a carryingvalue of $20,000. Pierre applies the fair value option tothis note. Given an increase in market interest rates, thefair value of the note is $22,600. Prepare the entry torecord the fair value option for this note, assuming (a) nochange in credit risk, and (b) the change is due to achange in credit risk.
Pierre Company has a 12% note payable with a carryingvalue of $20,000. Pierre applies the fair value option tothis note. Given an increase in market interest rates, thefair value of the note is $22,600. Prepare the entry torecord the fair value option for this note, assuming (a) nochange in credit risk, and (b) the change is due to achange in credit risk.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Pierre Company has a 12% note payable with a carrying
value of $20,000. Pierre applies the fair value option to
this note. Given an increase in market interest rates, the
fair value of the note is $22,600. Prepare the entry to
record the fair value option for this note, assuming (a) no
change in credit risk, and (b) the change is due to a
change in credit risk.
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