Lincoln National Bank purchases a loan with a par value of $100,000 for $83,000. The loan has experienced a more-than insignificant deterioration in credit quality since origination. Therefore, Lincoln National Bank determines that the loan meets the definition of a purchased asset with credit deterioration. At the date of acquisition, Lincoln National Bank calculated an allowance for expected credit losses of $10,000 for the asset. At the end of the first reporting period subsequent to Lincoln National Bank’s purchase of the loan, Lincoln National Bank should recalculate the allowance for credit losses in accordance with the CECL model. Assume that as a result of an improving credit position of the borrower, Lincoln National Bank determines that the expected credit loss has declined from $10,000 to $7,000.

Required:
a. How should Lincoln National Bank record the loan at acquisition?
b. How should Lincoln National account for the improved credit position of the borrower?