Nichols Corporation purchased $160,000 of Holly Inc.'s 5.5% bonds at par with the intent and ability to
Question:
Nichols Corporation purchased $160,000 of Holly Inc.'s 5.5% bonds at par with the intent and ability to hold the bonds until they mature in 2022, so Nichols classifies his investment as held to maturity. Unfortunately, a combination of problems at Holly and in the debt market caused the fair value of Holly's investment to drop to $134,000 during 2018. Nichols estimates that of the $26,000 decrease in fair value, $6,000 relates to losses losses and $20,000 relates to non-credit losses. Suppose Nichols concludes that Holly's bonds are not time-impaired because Nichols plans to sell the bonds in the near future.
By how much amount Net income before taxes for 2018 will be reduced?
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson