Question
Round Hill Development Company has an investment in bonds classified as available for sale securities at December 31, 2016. The bonds have a par value
Round Hill Development Company has an investment in bonds classified as available for sale securities at December 31, 2016. The bonds have a par value of $1,000,000, an amortized cost of $1,000,000, and a fair value of $980,000. The company previously recorded an adjusting entry for the unrealized holding loss of $20,000, however, they have now determined that the loss is no longer temporary, and that impairment accounting is appropriate. Note: this is the only investment the company holds.
Required
Prepare the necessary journal entries necessary based on the above information.
Prepare any journal entries necessary assuming that the bonds fair value increased to $998,000 at December 31, 2017.
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