Dicker Furriers purchased 1,000 bonds of Loose Corporation on January 10, 2020, for $750 per bond and
Question:
Dicker Furriers purchased 1,000 bonds of Loose Corporation on January 10, 2020, for $750 per bond and classified the investment as securities available-for-sale. Loose's market value was $400 per bond on December 31, 2020, and the decline was due to a noncredit loss. As of December 31, 2021, Dicker still owned the Loose bonds whose market value had declined to $110 per bond. The additional decline is due to a credit loss of $250 per bond. Dicker does not believe (and never has believed) it is more likely than not that it would have to sell the Loose investment before fair value recovers.
Dicker's December 31, 2021, balance sheet and the 2021 income statement would show the following:
| Investment in Loose bonds | Income statement loss on investments | ||||||
| a. | $ | 110,000 | $ | 750,000 | |||
| b. | $ | 110,000 | $ | 250,000 | |||
| c. | $ | 800,000 | $ | 0 | |||
| d. | $ | 505,000 | $ | 250,000 | |||
Expert Answer:
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
