Presented below is selected information related to the financial instruments of Carla Company at December 31, 2017. This is Carla Company's first year of operations.

Carrying

Amount

Fair Value

(at December 31)

Investment in debt securities (intent is to hold to maturity)

$37,000

$38,100Investment in Chen Company stock

801,600

905,700Bonds payable

222,400

198,300

(a) Carla elects to use the fair value option for these financial instruments (the fair value option for financial liabilities is discussed in Chapter 14). Assuming that Carla's net income is $104,600in 2017 before reporting any securities gains or losses, determine Carla's net income for 2017 (assume that the difference between the carrying value and fair value is due to credit deterioration).

Carla's net income for 2017

$

(b) Record the journal entry, if any, necessary at December 31, 2017, to record the fair value option for the bonds payable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

Dec. 31, 2017