Brief Exercise 14-14 Marigold Corporation has elected to use the fair value opti

Question

Brief Exercise 14-14 Marigold Corporation has elected to use the fair value option for one of its notes payable. The note was issued at an effective rate of 11% and has a carrying value of $11,000. At year-end, Marigold's borrowing rate (credit risk) has declined; the fair value of the note payable is now $12,600. 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 O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Explanation / Answer

1. Unrealized holding gain or loss : $ (1,600 )

Unrealized holding gain or (loss) = Carrying Value - Fair value = $ 11,000 - $ 12,600 = $ (1,600)

2.

Account Titles and Explanations Debit Credit Unrealized holding gain or loss : Equity $ 1,600 Notes Payable $ 1,600 To record unrealized holding loss on notes payable

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