Atlanta Inc. holds an AFS bond investment in Falcons Corporation. The amortized cost of the investment is $491,750 on December 31. Atlanta Inc. estimates the fair value of the bonds to be $455,000. The unrealized loss of $36,750 is partially due to a credit loss of $28.000. with the remaining portion due to other factors. The company adjusted the AFS bonds to fair value through OCI on December 31. a. Record the impairment loss on December 31, assuming that the company does not intend to sell the investment and does not believe it is more likely than not that it will be required to sell the investment before recovery of any unrealized loss. Note: List the two accounts that are debited first in your entry followed by the two accounts that are credited. Date Account Name Dec. 31 Loss on impairment To record the impairment loss. Debit Credit 28,000 0 0 0 0 0 0 b. Record the impairment loss on December 31, now assuming that the company intends to sell the investment. Note: List the two accounts that are debited first in your entry followed by the two accounts that are credited. Date Account Name (b) Dec. 31 Loss on Impairment <<<< Debit Credit 36,750 o 0 0 0

Atlanta Inc. holds an AFS bond investment in Falcons Corporation. The amortized cost of the investment is $491,750 on December 31. Atlanta Inc. estimates the fair value of the bonds to be $455,000. The unrealized loss of $36,750 is partially due to a credit loss of $28.000. with the remaining portion due to other factors. The company adjusted the AFS bonds to fair value through OCI on December 31. a. Record the impairment loss on December 31, assuming that the company does not intend to sell the investment and does not believe it is more likely than not that it will be required to sell the investment before recovery of any unrealized loss. Note: List the two accounts that are debited first in your entry followed by the two accounts that are credited. Date Account Name Dec. 31 Loss on impairment To record the impairment loss. Debit Credit 28,000 0 0 0 0 0 0 b. Record the impairment loss on December 31, now assuming that the company intends to sell the investment. Note: List the two accounts that are debited first in your entry followed by the two accounts that are credited. Date Account Name (b) Dec. 31 Loss on Impairment <<<< Debit Credit 36,750 o 0 0 0

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 7MCQ

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