Reporting a Note Payable Using the Fair Value Option On January 1, 2020, Nakoma Inc. issued an 8% note payable of $500,000 to a financial institution in order to finance an operational expansion through the acquisition of a competitor. Upon issuance of the note, Nakoma elected to account for the note using the fair value option. At the end of the first three years, 2020, 2021, and 2022, the note had a carrying value of $470,024, $472,326, and $474,835, respectively. At the end of the first three years, 2020, 2021, and 2022, the note had a fair value of $485,000, $476,000, and $474,000, respectively. Any differences between fair value and carrying value of the note are due to general interest rate changes.