Metlock Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of $76,700. Metlock determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $65,000. It is determined that this loss in value is uncollectible. Prepare the journal entry, if any, to record the reduction in value.

Question

Business

Hamlet

5 June, 08:20

Metlock Co. has a held-to-maturity investment in the bonds of Schuyler Corp. with a carrying value of $76,700. Metlock determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $65,000. It is determined that this loss in value is uncollectible. Prepare the journal entry, if any, to record the reduction in value.

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Reese Pratt · Answer 1

For recording the reduction in value the Journal entry is shown below:-

Explanation:

The Journal entry is shown below:-

Impairment Loss Dr, $11,70

To Debt Investment $11,70

(Being the reduction in value is recorded)

Therefore, Impairment loss is an loss and we already know that all the expenses and losses are debited and investment is an asset that shows the decrements hence it is credited.

Working note : -

Impairment loss = Carrying value - Decrease in value

= $76,700 - $65,000

= $11,700