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Indigo Corporation has municipal bonds classified as a held-to-maturity at December 31, 2025. These bonds have a par value of $732,000, an amortized cost of $732,000, and a fair value of $648,000. The company believes that impairment accounting is now appropriate for these bonds.

Indigo Corporation has municipal bonds classified as a held-to-maturity at December 31, 2025. These bonds have a par value of $732,000, an amortized cost of $732,000, and a fair value of $648,000. The company believes that impairment accounting is now appropriate for these bonds.

FINANCIAL ACCOUNTING
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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Indigo Corporation has municipal bonds classified as a held-to-maturity at December 31, 2025. These bonds have a par value of $732,000, an amortized cost of $732,000, and a fair value of $648,000. The company believes that impairment accounting is now appropriate for these bonds. Prepare the journal entry to recognize the impairment. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation eTextbook and Media List of Accounts What is the new carrying value of the municipal bonds? New carrying value $ eTextbook and Media List of Accounts Given that the maturity value of the bonds is $732,000, should Indigo Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? Debit Account Titles and Explanation Credit At December 31, 2026, the fair value of the municipal bonds is $692,000. Prepare the entry (if any) to record this information. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit
Transcribed Image Text:Indigo Corporation has municipal bonds classified as a held-to-maturity at December 31, 2025. These bonds have a par value of $732,000, an amortized cost of $732,000, and a fair value of $648,000. The company believes that impairment accounting is now appropriate for these bonds. Prepare the journal entry to recognize the impairment. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation eTextbook and Media List of Accounts What is the new carrying value of the municipal bonds? New carrying value $ eTextbook and Media List of Accounts Given that the maturity value of the bonds is $732,000, should Indigo Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? Debit Account Titles and Explanation Credit At December 31, 2026, the fair value of the municipal bonds is $692,000. Prepare the entry (if any) to record this information. (List debit entry before credit entry. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit
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