Indigo Corporation has municipal bonds classified as a held$-$to$-$maturity at December $31,2025.$ These bonds have a par value of

$$871,000,$ an amortized cost of $$871,000,$ and a fair value of $$799,000.$ The company believes that impairment accounting is now

appropriate for these bonds.

$($a$)$

Correct Answer $($Used$)$

Prepare the journal entry to recognize the impairment. $($List debit entry before credit entry. 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 O for the

amounts.$)$

Account Titles and Explanation

Credit

Bad Debt Expense

Allowance for Doubtful Accounts

$72,000$

$($b$)$

What is the new carrying value of the municipal bonds?

New carrying value $

Given that the maturity value of the bonds is $$871,000,$ should Indigo Corporation amortize the difference between the carrying

amount and the maturity value over the life of the bonds?