Coronado Corporation has elected to use the fair value option for one of its not
ID: 2409801 • Letter: C
Question
Coronado 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 $12,000. At year-end, Coronado’s borrowing rate (credit risk) has declined; the fair value of the note payable is now $13,400.
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).)
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
Unrealized Holding Gain or Loss $
Explanation / Answer
1. Unrealized holding loss = Fair Value – Book Value = $13,400 - $12,000 = $1,400
2.
Account Titles and Explanation Debit Credit Unrealized holding gain or loss - equity $1,400 Notes payable $1,400