Shonen Knife 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 $16,000. At year-end, Shonen Knife's borrowing rate has declined; the fair value of the note payable is now $17,500.
(a) Determine the unrealized holding gain or loss on the note.
Unrealized Holding Gain or Loss $
(b) Prepare the entry to record any unrealized holding gain or loss. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation Debit Credit