Question

Bee Company 5% bonds, purchased at face value, with an amortized cost of $4,600,000, and classified as held to maturity. At December 31, 2021, the Bee investment had a fair value of $3,650,000, and Stewart calculated that $540,000 of the fair value decline is a credit loss and $410,000 is a noncredit loss. At December 31, 2022, the Bee investment had a fair value of $3,850,000, and Stewart calculated that $290,000 of the difference between fair value and amortized cost was a credit loss and $460,000 was a noncredit loss. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Show less Credit No | 1 Date General Journal December 31, 202 Credit loss expense (NI) Allowance for credit losses Debit 540,000 540,000 | 2 290,000 December 31, 202 Allowance for credit losses Credit loss expense (NI) 290,000 X Required 1 Required 2 >

Answer 1

Solution:

Journal Entries
Event	Date	Particulars	Debit	Credit
1	31-Dec-21	Credit loss expense (NI) Dr	$540,000.00
		To Allowance for credit losses		$540,000.00
2	31-Dec-22	Allowance for credit losses Dr ($540,000 - $290,000)	$250,000.00
		To Credit loss expense (NI)		$250,000.00