Question: Buffalo Company commonly issues long-term notes payable to its various lenders. Buffalo has had a pretty good credit rating such that its effective borrowing rate

Buffalo Company commonly issues long-term notes payable to its various lenders. Buffalo has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Buffalo 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. Any changes in fair value are due to changes in market rates, not credit risk. Carrying Value Fair Value December 31, 2025 $58500 $58500 December 31, 2026 42700 41100 December 31,2027 33700 35600 a. Prepare the journal entry at December 31 (Buffalo's year-end) for 2025, 2026, and 2027, to record the fair value option for these notes. b. At what amount will the note be reported on Buffalo's 2026 balance sheet? c. What is the effect of recording the fair value option on these notes on Buffalo's 2027 net income

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