Company A estimated that it will receive less interest payments and principal payments from its Held-to-Maturity...

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Company A estimated that it will receive less interest payments and principal payments from its Held-to-Maturity...

Company A estimated that it will receive less interest payments and principal payments from its Held-to-Maturity investments in Company B’s bonds. See the information below:

Amortized cost of Company B bonds: $800,000.

Discounted value of estimated payments at the interest rate on the date of bond inception: $550,000.

Fair value of Company B bonds: $400,000.

How will Company A record this assessment?

a.
Company A will credit Investment account by $800,000.

b.
Company A will debit Credit Loss Expense by $250,000.

c.
Company A will debit Allowance for Credit Losses by $250,000.

d.
Company A will not record this assessment given that the investment is HTM.

e.
Company A will credit Credit Loss Expense by $250,000.

business accounting

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Answer 1

Answer #1

If the Company intend to hold the Investment up to its date of maturity, then company shall classify investment as the Held

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Company A estimated that it will receive less interest payments and principal payments from its Held-to-Maturity...

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