A. The fair value accounting adjustment:

1.Affects both the balance sheet and the current period income statement.2.Is not made when the current market value of investments in marketable securities is higher than original cost.3.May result in either a gain or a loss to be reported in the current period income statement.4.Represents a departure from the cost principle.

B. If a 15%, two-month note receivable is acquired from a customer in settlement of an existing account receivable of $5,000, the accounting entry for acquisition of the note will: 1.Include a debit to Notes Receivable for $5,750. 2.Include a debit to Notes Receivable for $5,062.50. 3.Include a credit to Interest Revenue for $62.50. 4.Include a debit to Notes Receivable for $5,000 and no entry for interest.