Question

5. A company holds an investment in corporate bonds classified as AFS. At the beginning of 2020, this investment is reported at a value of $4,000,000. Gains of $500,000 have been previously reported, and no impairment losses have been reported. At the end of 2020, the market value of the investment is $2,000,000, and it is determined that the decline in value is due to credit losses. Using the T-account template below, prepare the entry to recognize the impairment loss. LIABILITIES + EQUITY ASSETS Non-current Assets Property, Plant & Intangible Equipment Investments Assets/Other Current Assets Current Liabilities Non- Current Liabilities Contributed Capital Earned Capital Accumulated OCI

Answer 1

Liabilities Shareholder's Equity Date Current Assets Assets Non - Current Assets Property Intangible Plant & Investments Assets/Other Equipment $ $ 100 $ Accumulated Current Liabilities Non-Current Liabilities Contributed Capital Earned Capital OCI -100 = $ $ $ $ $ $ $ 15 $ $ $ $ $ - $ 15 03/15/2020 $ 12/31/2020 (Adjustment Entry) 7/16/2021 $ Profit Recognised $ $ - $ -115 $ $ -7 108 8 $ $ = $ $ $ $ $ $ $ $ $ $ 8 Note: i) The investment is hold by the Company for morethan 1 year, so it is shown under the head Non-Current Assets ii) please comment if you have any doubt, kindly give positive rating.