Answered: Recording Entries for Impairment of…

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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Recording Entries for Impairment of Investments—AFS

Atlanta Inc. holds an AFS bond investment in Falcons Corporation. The amortized cost of the investment is $351,250 on December 31, 2020. Atlanta Inc. estimates the fair value of the bonds to be $325,000. The unrealized loss of $26,250 is partially due to a credit loss of $20,000, with the remaining portion due to other factors. The company adjusted the AFS bonds to fair value through OCI on December 31, 2020.

a. Record the impairment loss on December 31, 2020, 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.
b. Record the impairment loss on December 31, 2020, now assuming that the company intends to sell the investment.

Note: List multiple debits or credits (when applicable) in alphabetical order.

	Date	Dr.	Cr.
a.	Dec. 31, 2020	Answer	Answer
		Answer	Answer
		Answer	Answer
		Answer	Answer
b.	Dec. 31, 2020	Answer	Answer
		Answer	Answer
		Answer	Answer
		Answer	Answer

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