Muir, Ltd. measures its trading securities at fair value. It has liabilities that it also measures using the fair value option. Muir has bonds outstanding (originally sold for $2,400,000) in the amount of $2,000,000 with a current bond premium of $340,000. The bonds were selling at 101 on the market on December 31. If its Fair Value Adjustment on Bonds Payable account currently contains a debit
amount of $400,000, what adjustment is necessary to report the value of the bonds under the fair value option.
A)
Date
Account
Debit
Credit
December 31
Unrealized Loss on Bonds Payable
180,000
Fair Value Adjustment-Bonds
180,000
B)
Date
Account
Debit
Credit
December 31
Unrealized Loss on Bonds Payable
80,000
Fair Value Adjustment-Bonds
80,000
C)
Date
Account
Debit
Credit
December 31
Fair Value Adjustment-Bonds
80,000
Unrealized Loss on Bonds Payable
80,000
D)
Date
Account
Debit
Credit
December 31
Fair Value Adjustment-Bonds
180,000
Unrealized Loss on Bonds Payable
180,000
Answer: C
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