Chapter 1 Intercorporate Investments: An Overview Held-to-maturity securities are recorded at amortized cost which approximates fair market value. The Company evaluates whether the decline in fair value of its investments is other-than-temporary at each quarter-end. This evaluation consists of a review by management, and includes market pri information and maturity dates for the securities held, market and economic trends in the industry and information on the issuer's financial condition and, if applicable, information on the guarantors financial condition. Factors considered in determining whether a loss is temporary include the length of time and extent to which the investment's fair value has been less than its cost basis be- cing , the financial specific events which estment for a rea condition and near-term prospects of the issuer and guarantors, including any may influence the operations of the issuer and our intent and ability to retain the inv sonable period of time sufficient to allow for any anticipated recovery of fair v Beverage Corporation 2013 financial statements) alue. (Note 1 to Monster Assume that the HTM bonds on Monster's 2013 balance sheet have a quired at par, and pay interest each December 31 at 4 percent. Monster determines that due to an other than-temporary decline in the issuer's liquidity, no additional interest payments are expected, but $325 million of principal is recoverable at maturity 2-year remaining life, were ac Required a. Calculate Monster's impairment loss for 2013. Round to the nearest million. b. Assume that on December 31,2014, the issuer's financial health has improved and the bonds' fair value is now $396 million. How does Monster report this information? If Monster receives all contractual principal and interest payments, what is the actual yield on the bond investment for 2014 and 2015? P1.4 Equity Method Investment Several Years After Acquisition On January 2, 2014, Best Bever- ages acquired 45 percent of the stock of Better Bottlers for $30 million in cash. Best Beverages accounts for its investment using the equity method. At the time of acquisition, Better Bottlers' balance sheet was as follows (in millions): Better Bottlers Balance Sheet, January 2, 2014 P1.4 entvies tes record the above information for 2016 and 201 7 comany's balance sheet assuming the c et, incoine staeme 17e se impaireed in 2016. Security Fis companty Prepure the journsl mporting year entse Decemter , a U.S. c maurity per AsC Topic te bond paying o percent interest annually on D mation is presented in the com Shoa how this info sive income for 2016 and 2017 on December 31 corporate Debt Investments On Janu Lo p12 Meld to-Maturity Inter wing corporate debt securities, classified as held-to- vests in the follow ing corporate debt secue . S year S1,000,o00 face value corporate The bond is priced to yield 5 percent to turity somd paying 4 percent interest annually on De 2. 4 year s00,000 face value corporate bond pay Required a. Calculate the cost of each investment, bond is priced to yield 5 percent to maturity Calculate interest income for 2016 and 2017. At what value are these investments reported on the company's December 31 2 On December 31, 2019, the company determines that an impairment loss sho 31,2018, balance b. ,000,000 bond. What factors indicate impairment loss? If the bond is est $500 reported on the a value o c d. estimated to amount of the impairment loss, and nd is estimated to have $1, where will Monster Bever its HTM securities .000 on December 31, 2019, what is the 1t reported on the 2019 financial statements? Held to Maturity Intercorporate Debt Investment, Impairment Losses Corporation is a public U.S. company that produces and distributes "alternative"e balance sheet includes $396 million in held-to-maturity bonds. Monster reports Mo its H LOI RS energy drinks. Its MONSTER BEVERAGE CORPORATION follows MNST