BE9.20 (LO 5) Assume that Gush Inc. invests in a bond for $55,000. The bond was...

 

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BE9.20 (LO 5) Assume that Gush Inc. invests in a bond for $55,000. The bond was purchased at par and is accounted for using amortized cost. At year end, management has determined that there is no significant increase in credit risk, but that there is a 1% chance that the company will not collect 20% of the face value of the bond (which also represents the present value of the bond) in the next 12 months. The expected loss model is used. Prepare the required year-end journal entry. BE9.21 (LO 5) Assume the same information as in BE9.20. Assume also that management feels that there has been a significant increase in the credit risk and that there is a 5% chance that the company will not collect 50% of the face value of the bond over its life. The expected loss model is used. Prepare the required journal entry. BE9.20 (LO 5) Assume that Gush Inc. invests in a bond for $55,000. The bond was purchased at par and is accounted for using amortized cost. At year end, management has determined that there is no significant increase in credit risk, but that there is a 1% chance that the company will not collect 20% of the face value of the bond (which also represents the present value of the bond) in the next 12 months. The expected loss model is used. Prepare the required year-end journal entry. BE9.21 (LO 5) Assume the same information as in BE9.20. Assume also that management feels that there has been a significant increase in the credit risk and that there is a 5% chance that the company will not collect 50% of the face value of the bond over its life. The expected loss model is used. Prepare the required journal entry.

Answer rating: 100% (QA)

Account Title Debit Credit Impairment Loss on Investment 110 Provision for Expected Los... View the full answer