Quaker Oats is a well-known name at most breakfast tables. The company does more than $6 billion in sales revenue each year. The Quaker annual report contained the following information concerning long-term debt:

Required:
What is meant by "fair value"? Explain why there is a difference between the carrying value and the fair value of the long-term debt for Quaker Oats. Assume that Quaker Oats decided to retire all of its long-term debt for cash (a very unlikely event). Prepare the journal entry to record the transaction.

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Long-Term Debt The fair value of long-term debt was $779.7 million at the end of the current fiscal year, which was based on market prices for the same or similar issues or on the current rates offered to the Company for similar debt of the same maturities. The carrying value of long-term debt as of the same date was $759.5 million.