Shonen Knife Corporation has elected to use the fair value option for one of its notes payable.

The note was issued at an effective rate of 11% and has a carrying value of HK\($16\),000. At year-end, Shonen Knife’s borrowing rate has declined; the fair value of the note payable is now HK\($17\),500.

(a) Determine the unrealized gain or loss on the note.

(b) Prepare the entry to record any unrealized gain or loss, assuming that the change in value was due to general market conditions.