Question

market price of Branch's bonds fell by $1,400,000, due to concerns about one of the company's principal drugs. The concerns were justified when the FDA banned the drug. $100,000 of that decline in value already had been included in Ocl as a temporary unrealized loss in a prior period. LED views $960,000 of the $1,400,000 loss as related to credit losses, and the other $440,000 as noncredit losses. LED does not plan to sell the investment and does not think it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for the decline in market value in the current period? How should the decline affect net income and comprehensive income? Complete this question by entering your answers in the tabs below. General Journal Effect What journal entries should LED record to account for the decline in market value in the current period? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the entry for credit losses.

1) Record the entry for credit losses.

2)Record the entry for fair value adjustment

Answer 1

Below answer based on IFRS 9 - Financial Instrument and treatment in
Income Statement as well as OCI , Along with fair value adjustment
As per Question , LED Corporation owns $1950000- Pharma Bonds
the market price of the Branch Bonds feel by $ 1400000
due to companies principal drug
$ 100000- decline in value already included in OCI as temporary Unorganized
loss in prior period
$960,000 out of $ 1400,000 loss relates to Credit LOSS
$440,000 AS Non credit losses
Journal Entry
Deatils		Debit($)	Credit($)
Oter than Temporary Impairment Loss ( Income /Statement)		9,60,000
Discount on Bond Investment ) Amortized)			9,60,000
LED to recognised the $960,0000 represents Credit Loss == need to
routed thourgh Income Statement
Balance Non Credit Loss amount to $ 440000 routed through OCI and Fair value adjustment
Oter than Temporary Impairment Loss == OCI		4,40,000
Fair value Adjustment			4,40,000
Fair value Adjustment		1,00,000
Net Unrealized gain & losses			1,00,000
( As explained above , amount already included uner OCI as temporary unrecognised loss relates to prior period
Disclosure on Financial Statement	Amnt($)
Income Statement	-9,60,000
Other Comprehensive Income	3,40,000
($440,000-$100,000
Net Effect on Comprehensibe Income	13,00,000
$960,000+$340,000