Question

Headland Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of $79,200. Headland determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $70,800. It is determined that this loss in value is uncollectible.
Prepare the journal entry, if any, to record the reduction in value.

Answer 1

Answer:

The Journal Entry is as follows:

Loss on Impairment $8,400

Debt Investment ($8,400)

Explanation:

Given.

Carrying Value = $79,200

Decreased Value = $70,800

Differences = $79,200 - $70,800

Differences = $8,400

Since the loss in value is determined, uncollectible.

The required entry on the journal entry are the amount loss on impairment and the amount invested on debt.

The Journal Entry is as follows:

Loss on Impairment $8,400

Debt Investment ($8,400)