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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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