(Answered) Problem - fallen company commonly issues long-term notes

Accounting

Problem - Fallen Company commonly issues long-term notes payable to its various lenders. Fallen has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Fallen has elected to use the fair value option for the long-term notes issued to Barclay's Bank and has the following data related to the carrying and fair value for these notes.

Carrying Value Fair Value

December 31, 2012 $54,000 $54,000

December 31, 2013 44,000 42,500

December 31, 2014 36,000 38,000

(a) Prepare the journal entry at December 31 (Fallen's year-end) for 2012, 2013, and 2014, to record the fair value option for these notes.

(b) At what amount will the note be reported on Fallen's 2013 balance sheet?

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