Harper Company commonly issues long-term notes payable to its various lenders. Harper has had a pretty good credit rating such that its effective borrowing rate is quite low (less than 8% on an annual basis). Harper has elected to use the fair value option for the long-term notes issued to Barclay's Bank and has the following data related to the carrying and fair value for these notes.

Carrying Value Fair Value

December 31, 2017 $135,000 $135,000

December 31, 2018 112,000 107,000

December 31, 2019 90,000 97,000

part 1

Prepare the adjusting entry at December 31 (Harper's year-end) for 2017, 2018, and 2019 to record the fair value option for these notes.

Dec 31 2017

Dec 31 2018

Dec 31 2019

Part 2

At what amount will the note be reported on Harper's 2018 balance sheet?

Part 3

What is the effect of recording the fair value option on these notes on Harper's 2019 income?