A company buys debt securities at a par value of $200,000, and designates them as AFS securities. At the end of the year, the company still holds the securities, but their fair value has declined to $160,000. Required

For each circumstance below, indicate where the loss, if any, is reported, and how the investment is displayed on the companys year-end balance sheet.

a. The company intends to sell the securities before the loss in value is recovered.

How is the loss reported?

A.The loss is reported in an allowance account and is reported in income.

B.The loss is a direct reduction in the investment balance and is reported in income.

C.The loss is reported in an allowance account but is not reported in income.

D. The loss is a direct reduction in the investment balance but is not reported in income.

How is the investment reported at year-end on the balance sheet?

If answer fields don't apply, select "Not applicable" as your answer option and leave the amount blank (zero). Do not use negative signs with any of your answers.

Year-End Balance Sheet Investment in AFS securities

b. The company does not intend to sell the securities before the loss in value is recovered, and 1. The loss is determined to be entirely an expected credit loss.

How is the loss reported?

A.The loss is reported in an allowance account and is reported in income.

B.The loss is a direct reduction in the investment balance and is reported in income.

C.The loss is reported in an allowance account but is not reported in income.

D.The loss is a direct reduction in the investment balance but is not reported in income.

How is the investment reported at year-end on the balance sheet? If answer fields don't apply, select "Not applicable" as your answer option and leave the amount blank (zero). Do not use negative signs with any of your answers.

Year-End Balance Sheet Investment in AFS securities

2. The loss is $35,000 credit-related and $5,000 market-related

How is the loss reported?

A.The credit-related loss is reported in an allowance account and the the market-related loss is a direct reduction in the investment balance, but neither losses are reported in income.

B.The credit-related loss is reported in an allowance account, and is reported in income. The market-related loss is a direct reduction in the investment balance but not reported in income. C.The credit-related loss is reported in an allowance account, but not reported in income. The market-related loss is a direct reduction in the investment balance, and is reported in OCI.

D.The credit-related loss is reported in an allowance account, and is reported in income. The market-related loss is a direct reduction in the investment balance, and is reported in OCI.

How is the investment reported at year-end on the balance sheet? If answer fields don't apply, select "Not applicable" as your answer option and leave the amount blank (zero). Do not use negative signs with any of your answers.

Year-End Balance Sheet Investment in AFS securities