Description of this paper

E17-18B (Impairment of Debt Securities) Waxer Corporation has an investment in corporate bonds classified as available-for-sale at December 31, 2014. These bonds have a par value of $500,000, an amortized cost of $500,000, and a fair value of $425,000. Th

Description

solution


Question

E17-18B (Impairment of Debt Securities) Waxer Corporation has an investment in corporate bonds classified as available-for-sale at December 31, 2014. These bonds have a par value of $500,000, an amortized cost of $500,000, and a fair value of $425,000. The unrealized loss of $75,000 previously recognized as other comprehensive;income and as a separate component of stockholders? equity is now determined to be other than temporary. That is, the company believes that impairment accounting is now appropriate for these bonds.;Instructions;(a) Prepare the journal entry to recognize the impairment.;(b) What is the new cost basis of the corporate bonds? Given that the maturity value of the bonds is $500,000, should Waxer Corporation accrete the difference between the carrying amount and the maturity value over the life of the bonds?;(c) At December 31, 2015, the fair value of the bonds is $450,000. Prepare the entry (if any) to record this information.

 

Paper#78450 | Written in 18-Jul-2015

Price : $27
SiteLock