Florimell Corporation has government bonds classified as held-for-collection at December 31, 2015. These bonds have a par value of $600,000, an amortized cost of $600,000, and a fair value of $555,000. In evaluating the bonds, Florimell determines the bonds have a $45,000 permanent decline in value. That is, the company believes that impairment accounting is now appropriate for these bonds.

Instructions

1. Prepare the journal entry to recognize the impairment.
2. At December 31, 2016, the fair value of the municipal bonds is $570,000. Prepare the entry (if any) to record this information.