Please answer all following question or as shown in the photo.

Journal entry

1. Record the entry for reclassification adjustment.

2. Record the entry for credit losses

Effect

Income statement (Effect) $___________

Other comprehensive income (Effect) $___________

Net effect on comprehensive income (Effect) $___________

Transcribed Image Text:

LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-for-sale. The market price of Branch's bonds fell by $450.000, due to concerns about one of the company's principal drugs. The concerns were Justified when the FDA banned the drug. $100,000 of that decline in value already had been included in Oci as a temporary unrealized loss in a prior period. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250.000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for the decline in market value in the current period? How should the decline affect net income and comprehensive income? Complete this question by entering your answers in the tabs below. Journal entry worksheet > d? (If no entry is Record the entry for reclassification adjustment. Note: Enter debits before credits. Event General Journal Debit Credit 1 Record the entry for credit losses. Note: Enter debits before credits. Event General Journal Debit Credit General Journal Effect How should the decline affect net income and comprehensive income? (Negative amounts should be entered with minus sign.) Effect Income statement Other comprehensive income Net effect on comprehensive income 100,000 LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities available-for-sale. The market price of Branch's bonds fell by $450.000, due to concerns about one of the company's principal drugs. The concerns were Justified when the FDA banned the drug. $100,000 of that decline in value already had been included in Oci as a temporary unrealized loss in a prior period. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250.000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for the decline in market value in the current period? How should the decline affect net income and comprehensive income? Complete this question by entering your answers in the tabs below. Journal entry worksheet > d? (If no entry is Record the entry for reclassification adjustment. Note: Enter debits before credits. Event General Journal Debit Credit 1 Record the entry for credit losses. Note: Enter debits before credits. Event General Journal Debit Credit General Journal Effect How should the decline affect net income and comprehensive income? (Negative amounts should be entered with minus sign.) Effect Income statement Other comprehensive income Net effect on comprehensive income 100,000

Answer rating: 100% (QA)

Solutions A Journal Entries Event General Journal Debit Credit 1 Fair Value Adjustme... View the full answer