Question

Marigold Company has the following investments as of December 31, 2020:

Investments in common stock of Laser Company		$1,430,000
Investment in debt securities of FourSquare Company		$3,090,000

In both investments, the carrying value and the fair value of these two investments are the same at December 31, 2020. Marigold’s stock investments does not result in significant influence on the operations of Laser Company. Marigold’s debt investment is considered held-to-maturity. At December 31, 2021, the shares in Laser Company are valued at $990,000; the debt investment securities of FourSquare are valued at $2,310,000 and are considered impaired.

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Prepare the journal entry to record the impairment of the debt securities at December 31, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2021

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Partially correct answer iconYour answer is partially correct.

Assuming the fair value of the Laser shares is $1,320,000 and the value of its debt investment is $2,790,000, what entries, if any, should be recorded in 2022 related to impairment? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2022

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List of Accounts

  

  

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is partially correct.

Assume that the debt investment in FourSquare Company was available-for-sale and the expected credit loss was $880,000. Prepare the journal entry to record this impairment on December 31, 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Answer 1

Solution:-

Journal entry to record the impairment of the debt securities at decemer 31,2021

DATE	ACCOUNT TITLES AND EXPLANATION	DEBIT	CREDIT
Dec.31	Loss on investment in laser Company	4,40,000
	To Investment in Laser Company		4,40,000
($14,30,000-$9,90,000)
(Being loss/profit occurred on shares on investment calculated in Laser company)
Dec.31	Loss on investment in Four Square Company	7,80,000
	To Investment in four square Company		7,80,000
($30,90,000-$23,10,000)
(Being loss/profit occurred on shares on investment calculated in Four Sqaure company)

Journal Entries if any should be recorded in 2022 related to impairment

DATE	ACCOUNT TITLES AND EXPLANATION	DEBIT	CREDIT
Dec.31	Loss on investment in laser Company	1,10,000
	To Investment in Laser Company		1,10,000
	($14,30,000- $13,20,000)
Dec.31	Loss on investment in Four Square Company	3,00,000
	To Investment in Four Square Company		3,00,000
	($30,90,000- $27,90,000)

Journal Entries to record this impairment on december 31,2021

DATE	ACCOUNT TITLES AND EXPLANATION	DEBIT	CREDIT
Dec.31	Loss on debt investment available for sale securities	8,80,000
	To Available for sale securities		8,80,000
	(Being Debt investment available for sale at the expected credit loss)