Martinez Company has the following investments as of December 31, 2020: Investments in common stock of Laser Company $1,540,000 Investmen
Martinez Company has the following investments as of December 31, 2020: Investments in common stock of Laser Company $1,540,000 Investmen
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Martinez Company has the following investments as of December 31, 2020:
In both investments, the carrying value and the fair value of these two investments are the same at December 31, 2020. Martinez’s stock investments does not result in significant influence on the operations of Laser Company. Martinez’s debt investment is considered held-to-maturity. At December 31, 2021, the shares in Laser Company are valued at $1,120,000; the debt investment securities of FourSquare are valued at $2,740,000 and are considered impaired.
| Investments in common stock of Laser Company | $1,540,000 | |
| Investment in debt securities of FourSquare Company | $3,590,000 |
In both investments, the carrying value and the fair value of these two investments are the same at December 31, 2020. Martinez’s stock investments does not result in significant influence on the operations of Laser Company. Martinez’s debt investment is considered held-to-maturity. At December 31, 2021, the shares in Laser Company are valued at $1,120,000; the debt investment securities of FourSquare are valued at $2,740,000 and are considered impaired.
Prepare the journal entry to record the impairment of the debt securities at December 31, 2021. (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 0 for the amounts.)
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Date
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Account Titles and Explanation
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Debit
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Credit
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| Dec. 31, 2021 |
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Assuming the fair value of the Laser shares is $1,440,000 and the value of its debt investment is $3,160,000, what entries, if any, should be recorded in 2022? (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 0 for the amounts.)
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Date
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Account Titles and Explanation
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Debit
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Credit
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| Dec. 31, 2022 |
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Assume that the debt investment in FourSquare Company was available-for-sale and the expected credit loss was $950,000. Prepare the journal entry to record this impairment on December 31, 2021.
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Account Titles and Explanation
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Debit
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Credit
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