$231,000 during 2021. Wang applies the CECL model to account for its investment and calculates that, of the $49,000 drop in fair value, $17,000 of it relates to credit losses for amounts not expected to be collected, and the $32,000 remainder relates to noncredit losses. Wang's accounting for this impairment will reduce before-tax net income for 2021 by:
$231,000 during 2021. Wang applies the CECL model to account for its investment and calculates that, of the $49,000 drop in fair value, $17,000 of it relates to credit losses for amounts not expected to be collected, and the $32,000 remainder relates to noncredit losses. Wang's accounting for this impairment will reduce before-tax net income for 2021 by:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Wang Corporation purchased
$280,000 of Hales Inc. 7% bonds at
par in 2020 with the intent and ability
to hold the bonds until the bonds
mature in 2025, so Wang classifies its
investment as held-to-maturity.
Unfortunately, a combination of
problems at Hales and in the debt
market caused the fair value of the
Hales investment to decline to
$231,000 during 2021. Wang applies
the CECL model to account for its
investment and calculates that, of the
$49,000 drop in fair value, $17,000 of
it relates to credit losses for amounts
not expected to be collected, and the
$32,000 remainder relates to
noncredit losses. Wang's accounting
for this impairment will reduce
before-tax net income for 2021 by:
Transcribed Image Text:O
O
O
O
$17,000.
$49,000.
$32,000.
$0.
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