INTERMEDIATE ACCOUNTING RMU 9TH EDITION
9th Edition
ISBN: 9781260998726
Author: SPICELAND
Publisher: MCG
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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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Recording Entries for Impairment of Investments–AFS
Atlanta Inc. holds an AFS bond investment in Falcons Corporation. The amortized cost of the investment is $84,300 on December 31, 2020. Atlanta Inc. estimates the fair value of the bonds to be
$78,000. The unrealized loss of $6,300 is partially due to a credit loss of $4,800, with the remaining portion due to other factors. The company adjusted the AFS bonds to fair value through OCI on
December 31, 2020.
a. Record the impairment loss on December 31, 2020, assuming that the company does not intend to sell the investment and does not believe it is more likely than not that it will be required to
sell the investment before recovery of any unrealized loss.
b. Record the impairment loss on December 31, 2020, now assuming that the company intends to sell the investment.
• Note: List multiple debits or credits (when applicable) in alphabetical order.
Date
Account Name
Dr.
Cr.
a. Dec. 31, 2020 Unrealized Gain or Loss--OCI
1500
Allowance for…
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
Fair Value
Fair Value
Amortized Cost
Amortized Cost
Securities:
12/31/2020
12/31/2021
12/31/2020
12/31/2021
АВС Со. Вonds
$385,000
$410,000
$377, 500
$370, 000
Fair Value
Fair Value
Trading Securities:
12/31/2021
$ 66,000
$ 87,000
$ 48,500
12/31/2020
Cost
DEF Co. Bonds
$ 55,000
$ 57,000
$ 54,000
$ 69,100
$ 49,000
$ 42,900
GEH Inc. Bonds
IJK Inc. Bonds
Available-for-Sale
Fair Value
Fair Value
Cost
12/31/2020
$147,400
Securities:
12/31/2021
LMN Co. Bonds
$161,900
$150, 000
What balance sheet amount would Beresford report for the total of its investments in bonds at 12/31/2020?
Sheridan Company in its first year of operations provides the following information related to one of its available-for-sale debt
securities at December 31, 2025.
Amortized cost
Fair value
Expected credit loss
(a)
$50,800
41,600
12.450
Your answer is correct.
What is the amount of the credit loss that Sheridan should report on this available-for-sale security at December 31, 2025? (Do
not leave any answer field blank. Enter O for amounts.)
Amount of the credit loss. $
9200
Chapter 12 Solutions
INTERMEDIATE ACCOUNTING RMU 9TH EDITION
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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