Mitchell Inc. issued 64, 6%, $1,000 bonds on January 1, 2020, for $62,294. The bonds...
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Mitchell Inc. issued 64, 6%, $1,000 bonds on January 1, 2020, for $62,294. The bonds pay cash interest semiannually each June 30, and December 31, and were issued to yield 7%. The bonds mature December 31, 2022, and the company uses the effective interest method to amortize bond discounts or premiums. On January 1, 2020, Mitchell Inc. elects to account for the bonds using the fair value option. At December 31, 2020, the market rate on the bonds changed to 6.5% due to a general increase in market risk. The journal entry to record the adjustment of bonds payable to fair value includes
a. A credit to Net Unrealized Holding Gain or Loss-NI account by $591.
b. A debit to Net Unrealized Holding Gain or Loss-NI account by $584.
c. A credit to Fair Value Adjustment-Bonds Payable account by $591.
d. A debit to Fair Value Adjustment-Bonds Payable account by $584
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