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

A)

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.

December 31 2017

December 31 2018

December 31 2019

B)

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

C)

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

income will ______ by $_____________________