Assume a company purchased an investment inAyayai Ltd. bonds for $99,800 at par value at thebeginning of the year. The bonds pay interest onDecember 31 each year. The bond is carried atamortized cost. Ayayai is experiencing financialdifficulties and is not able to make the payment ofprincipal and interest on the bond. The presentvalue of the discounted revised cash flows is$76,500 using the current market interest rate.The company follows ASPE.Is the investment impaired? If so, prepare thejournal entry to reflect the impairment. (Creditaccount titles are automatically indented when theamount is entered. Do not indent manually. If noentry is required, select "No Entry" for the accounttitles and enter O for the amounts. List debit entrybefore credit entry.)Account TitlesSUPPORTeTextbook and Media

The objective of the question is to determine whether the investment in Ayayai Ltd. bonds is…

Answered: Assume a company purchased an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for $400,000 and, at the end of 2020, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for-collection. Keune is facing a tough economic environment and informs all of its investors that it will be unable to make all payments according to the contractual terms. The controller of Komissarov has prepared the following revised expected cash flow forecast for this bond investment. Dec. 31 Expected Cash Flows 2021 $ 35,000 2022 35,000 2023 385,000 Total cash flows $455,000 Instructions a. Determine the impairment loss for Komissarov at December 31, 2020. b. Prepare the entry to record the impairment loss for Komissarov at December 31, 2020. c. On January 15, 2021, Keune receives a major capital infusion from a private equity investor. It informs Komissarov that the…
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