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Cairo Corporation has government bonds classified as held forcollection at December 31 2010 These bonds have a par value of $800000 an amortized cost of $800000 and a fair value of $740000 In

Cairo Corporation has government bonds classified as held-for-collection at December 31, 2010. These bonds have a par value of $800,000, an amortized cost of $800,000, and a fair value of $740,000. In evaluating the bonds, Cairo determines the bonds have a $60,000 permanent decline in value. That is, the company believes that impairment accounting is now appropriate for these bonds. Instructions (a) Prepare the journal entry to recognize the impairment. (b) What is the new cost basis of the bonds? Given that the maturity value of the bonds is $800,000, should Cairo Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds? (c) At December 31, 2011, the fair value of the municipal bonds is $760,000. Prepare the entry (if any) to record this information.

 

May 15 2020 View more View Less

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