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Chapter 12: 10BE (page 610)

Hillsborough Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of \(70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to \)60,000. It is determined that this loss in value is uncollectible. Prepare the journal entry, if any, to record the reduction in value.

Short Answer

Expert verified

The loss in the value of the investment is $10,000.

Step by step solution

01

Step-by-Step Solution Step 1: Definition of held-to-maturity investment 

Held-to-maturity is those securities that are kept in holding till the date of the maturity of the security.

02

Step 2:Entry of the loss

In the case of held-to-maturity securities, the amount of holding loss is not recognized. Hence, no journal entry is passed in respect of this loss.

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Most popular questions from this chapter

Question: Treasure Land Corporation incurred the following costs in 2017.

Cost of laboratory research aimed at the discovery of new knowledge

\(120,000

Cost of testing in search for product alternatives

100,000

Cost of engineering activity required to advance the design of a product to the manufacturing stage

210,000

Prototype testing subsequent to meeting economic viability

75,000

\)505,000

Prepare the necessary 2017 journal entry(ies) for Treasure Land.

Waters Corporation purchased Johnson Company 3 years ago and at that time recorded goodwill of \(400,000. The Johnson Division鈥檚 net assets, including the goodwill, have a carrying amount of \)800,000. The recoverable amount of the division is estimated to be $1,000,000. Prepare Waters鈥� journal entry, if necessary, to record an impairment of the goodwill.

Use the information provided in BE12-7. Assume that the fair value of the division is estimated to be \(750,000 and the implied goodwill is \)350,000. Prepare Waters鈥� journal entry, if necessary, to record impairment of the goodwill.

Carow Corporation purchased on January 1, 2017, as a held-to-maturity investment, \(60,000 of the 8%, 5-year bonds of Harrison, Inc. for \)65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow鈥檚 journal entries for (a) the purchase of the investment, and (b) the receipt of semiannual interest and premium amortization. Assume effective-interest amortization is used

Use the information from BE17-5 but assume the stock is nonmarketable. Prepare Fairbanks鈥� journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment, if any.
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