On January 1, 2018, Wilson Corporation acquired mortgage-backed securities (MBS) from National Financial for $10,000 and classified the investment in its available-for-sale (AFS) portfolio. On December 31, 2018, the MBS's fair value had declined to $7,000, and this decline was considered another-than-temporary impairment. The $3,000 impairment during 2018 was attributed to:

∙ Credit losses-$1,000

∙ Other factors-$2,000

On December 31, 2019, the MBS's fair value recovered to $9,000. The $2,000 increase during

2019 was attributed to:

∙ Credit losses-$750

∙ Other factors-$1,250

Required:

1. Assume that Wilson follows U.S. GAAP. Prepare the journal entries to record:

∙ The January 1, 2018, purchase

∙ The December 31, 2018, impairment

∙ The December 31, 2019, impairment recovery

Summarize the amounts that Wilson reports in net income and other comprehensive income (OCI) during 2018 and 2019. Ignore income tax effects.

2. Repeat requirement 1 assuming Wilson follows IFRS.

3. Assume instead that the MBS's value recovered to $11,000 on December 31, 2019. Explain how the $4,000 increase during 2019 will be allocated to income and OCI under (a) U.S. GAAP and (b) IFRS.