Tsui Corporation owns corporate bonds at December 31, 2014, accounted for using the amortized cost model. These bonds have a par value of $800,000 and an amortized cost of $788,000. After an impairment review was triggered, Tsui determined that the discounted impaired cash flows are $737,500 using the current market rate of interest, but are $734,000 using the market rate when the bonds were first acquired. The company follows a policy of directly reducing the carrying amount of any impaired assets.
Instructions
(a) Assuming Tsui Corporation is a private enterprise that applies ASPE, prepare any necessary journal entry(ies) related to
(1) The impairment at December 31,2014
(2) A December 31,2015 fair value of $760,000 and an adjusted carrying amount at that date of $741,500.
(b) Assuming Tsui Corporation applies IFRS using IAS 39, prepare any necessary journal entry(ies) related to
(1) The impairment at December 31, 2014
(2) A December 31, 2015 fair value of $760,000 and an adjusted carrying amount at that date of $741,500.
(c) Assuming Tsui Corporation applies IFRS and has adopted IFRS 9, prepare any necessary journal entry(ies) related to
(1) The impairment at December 31, 2014
(2) A December 31, 2015 fair value of $760,000 and an adjusted carrying amount at that date of $741,500.
(d) Assume that Tsui is a private enterprise under the situation described in part (a), and that the company uses a valuation allowance instead of directly reducing the carrying amount of the investment. Prepare the entries required in part (a) for
(1) The impairment
(2) The subsequent increase in fair value.