Homework Answers
ANSWER
1) Journal entries to recognize impairment
| Date | Account Title and Explanation | Debit | Credit |
| Dec, 31 2017 | Loss on impairment | 72,000 | |
| To debit investments | 72,000 | ||
| [To record impairment] |
Calculation ; Loss on Impairment = 826,000 - 754,000 = 72,000
2)
The new cost basis is $ 754,000 .
GAAP indicates that the difference between the carrying amount and the maturity value should not be recorded . If the bonds are impaired, it is inappropriate to increase(amortize) the assets back up to its original maturity value
3)
Unrealized holding gain on equity ($790,000 - $754,000 ) is $36,000
NO Entry is required
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