Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 12, Problem 12.18BE
Impairments (AFS Credit Loss Model) (Appendix 12B)
• LO12-4, LO12-8
Answer BE 12-17 under the assumption that LED Corporation used the AFS Credit Loss Model introduced in ASU 2016-13 and required after 2020.
BE 12–17
Available-f or-sale securities and impairment (Appendix 12B)
• LO12-4, LO12-8
LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-forsale. The market price of Branch’s bonds fell by $450,000, due to concerns about one of the company’s principal drugs. The concerns were justified when the FDA banned the drug. $100,000 of that decline in value already had been included in OCI as a temporary unrealized loss in a prior period. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250,000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What
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On January 1, 2020, the Evergreen Corporation purchased marketable equity securities for P2,000,000. The company also paid commission, taxes and other transaction costs amounting to P50,000. Because the securities were acquired not for immediate trading, Evergreen exercise its option to take the change in fair values through other comprehensive income. The securities had the following fair values at December 31, 2020 and 2021, respectively; P1,750,000 and P2,100,000. No securities were sold during 2020 and 2021. What amount of unrealized gain or loss should be reported in the December 31, 2021 statement of financial position as a component of shareholder’s equity.
Beresford Inc. purchased several investments in debt securities during 2020, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent. Held-to-Maturity Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Amortized Cost 12/31/2020 Amortized Cost 12/31/2021 ABC Co. Bonds $ 375,000 $ 400,000 $ 367,500 $ 360,000 Trading Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Cost DEF Co. Bonds $ 48,000 $ 59,500 $ 66,000 GEH Inc. Bonds $ 47,000 $ 77,000 $ 39,000 IJK Inc. Bonds $ 44,000 $ 38,500 $ 32,900 Available-for-Sale Securities: Fair Value 12/31/2020 Fair Value 12/31/2021 Cost LMN Co. Bonds $ 130,500 $ 150,400 $ 140,000 What would be the balance in Beresford's accumulated other comprehensive income with respect to these investments in its 12/31/2021 balance sheet (ignore taxes)?
Beresford Incorporated purchased several investments in debt securities during 2023, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent.
Held-to-Maturity Securities:
Fair Value 12/31/2023
Fair Value 12/31/2024
Amortized Cost 12/31/2023
Amortized Cost 12/31/2024
ABC Company Bonds
$ 375,000
$ 400,000
$ 367,500
$ 360,000
Trading Securities:
Fair Value 12/31/2023
Fair Value 12/31/2024
Cost
DEF Company Bonds
$ 48,000
$ 59,500
$ 66,000
GEH Incorporated Bonds
$ 47,000
$ 77,000
$ 39,000
IJK Incorporated Bonds
$ 44,000
$ 38,500
$ 32,900
Available-for-Sale Securities:
Fair Value 12/31/2023
Fair Value 12/31/2024
Cost
LMN Company Bonds
$ 130,500
$ 150,400
$ 140,000
What total unrealized holding gain would Beresford report in its 2024 income statement relative to its investments in bonds?
Chapter 12 Solutions
Intermediate Accounting
Ch. 12 - All investments in debt securities are classified...Ch. 12 - When market rates of interest rise after a...Ch. 12 - Does GAAP distinguish between fair values that are...Ch. 12 - When a debt investment is acquired to be held for...Ch. 12 - Prob. 12.5QCh. 12 - What is comprehensive income? Its composition...Ch. 12 - Why are holding gains and losses treated...Ch. 12 - Prob. 12.8QCh. 12 - Prob. 12.9QCh. 12 - Prob. 12.10Q
Ch. 12 - Under IFRS No. 9, which reporting categories are...Ch. 12 - Prob. 12.12QCh. 12 - Do U.S. GAAP and IFRS differ in the amount of...Ch. 12 - Under what circumstances is the equity method used...Ch. 12 - The equity method has been referred to as a...Ch. 12 - In the application of the equity method, how...Ch. 12 - Prob. 12.17QCh. 12 - Prob. 12.18QCh. 12 - Prob. 12.19QCh. 12 - How does IFRS differ from U.S. GAAP with respect...Ch. 12 - What is the effect of a company electing the fair...Ch. 12 - Define a financial instrument. Provide three...Ch. 12 - Some financial instruments are called derivatives....Ch. 12 - (Based on Appendix 12A) Northwest Carburetor...Ch. 12 - Prob. 12.25QCh. 12 - Prob. 12.26QCh. 12 - (Based on Appendix 12B) Reporting an investment at...Ch. 12 - Prob. 12.28QCh. 12 - Explain how the CECL model (introduced in ASU No....Ch. 12 - Prob. 12.30QCh. 12 - Prob. 12.1BECh. 12 - Prob. 12.2BECh. 12 - Trading securities LO12-3 For the Coca-Cola bonds...Ch. 12 - Available -for-sale securities LO12-4 SL...Ch. 12 - Available -for-sale securities LO12-4 For the...Ch. 12 - Prob. 12.6BECh. 12 - Prob. 12.7BECh. 12 - Prob. 12.8BECh. 12 - Prob. 12.9BECh. 12 - Prob. 12.10BECh. 12 - Equity investments and dividends LO12-5 Turner...Ch. 12 - Prob. 12.12BECh. 12 - Prob. 12.13BECh. 12 - Equity method investments LO12-6, LO12-9 Kim...Ch. 12 - Change in principle; change to the equity method ...Ch. 12 - Fair value option; equity method investments ...Ch. 12 - Prob. 12.17BECh. 12 - Impairments (AFS Credit Loss Model) (Appendix 12B)...Ch. 12 - Prob. 12.19BECh. 12 - Prob. 12.20BECh. 12 - Prob. 12.1ECh. 12 - Prob. 12.2ECh. 12 - Securities held-to-maturity LO12-1 FFT...Ch. 12 - Prob. 12.4ECh. 12 - Prob. 12.5ECh. 12 - Trading securities LO12-1 [This is a variation of...Ch. 12 - Various transactions relating to trading...Ch. 12 - Prob. 12.8ECh. 12 - Securities available-for-sale; adjusting entries ...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Available -for-sale securities LO12-1, LO12-4...Ch. 12 - Classification of securities; adjusting entries ...Ch. 12 - Prob. 12.14ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Equity investments; fair value through net income ...Ch. 12 - Prob. 12.17ECh. 12 - Equity investments; fair value through net income ...Ch. 12 - Investment securities and equity method...Ch. 12 - Equity method; purchase; investee income;...Ch. 12 - Error corrections; equity method investment ...Ch. 12 - Prob. 12.22ECh. 12 - Prob. 12.23ECh. 12 - Prob. 12.24ECh. 12 - Prob. 12.25ECh. 12 - Prob. 12.26ECh. 12 - Prob. 12.27ECh. 12 - Prob. 12.28ECh. 12 - Prob. 12.29ECh. 12 - Prob. 12.30ECh. 12 - Prob. 12.31ECh. 12 - Prob. 12.32ECh. 12 - Accounting for impairments under IFRS (Appendix...Ch. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Securities available-for-sale; bond investment;...Ch. 12 - Prob. 12.4PCh. 12 - Various transactions related to trading securities...Ch. 12 - Various transactions related to securities...Ch. 12 - Prob. 12.7PCh. 12 - Various transactions relating to trading...Ch. 12 - Securities held-to-maturity; securities available...Ch. 12 - Investment securities and equity method...Ch. 12 - Prob. 12.11PCh. 12 - Prob. 12.12PCh. 12 - Prob. 12.13PCh. 12 - Equity method LO12-6, LO12-7 On January 2, 2018,...Ch. 12 - Prob. 12.15PCh. 12 - Prob. 12.16PCh. 12 - Accounting for debt and equity investments ...Ch. 12 - Prob. 12.18PCh. 12 - Real World Case 121 Intels investments LO12-4 The...Ch. 12 - Prob. 12.2BYPCh. 12 - Prob. 12.4BYPCh. 12 - Prob. 12.6BYPCh. 12 - Real World Case 127 Comprehensive income Microsoft...Ch. 12 - Continuing Cases Target Case LO12-4, LO12-6...
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