Question: Please explain how to get this answer. Thank you. Liang Corporation purchased $100,000 of Hales Inc. 6% bonds at par in 2020 with the intent

Please explain how to get this answer. Thank you. Liang Corporation

Please explain how to get this answer. Thank you.

Liang Corporation purchased $100,000 of Hales Inc. 6% bonds at par in 2020 with the intent and ability to hold the bonds until the bonds mature in 2025, so Liang classifies its investment as held-to-maturity. Unfortunately, a combination of problems at Hales and in the debt market caused the fair value of the Hales investment to decline to $70,000 during 2021. When Liang applies the CECL model to account for its investment it calculates that, of the $30,000 drop in fair value, $10,000 of it relates to credit losses for amounts not expected to be collected. Liang's accounting for this impairment will reduce before-tax net income for 2021 by: Multiple Choice $0 $10,000. $20,000 $30,000

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