Vaughn Corporation has municipal bonds classified as a held$-$to$-$maturity at December $31,2020.$ These bonds have a par value of $$732,000,$ an amortized cost of $$732,000,$ and a fair value of $$648,000.$ The company believes that impairment accounting is now appropriate for these bonds.

$($a$)$

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Prepare the journal entry to recognize the impairment. $($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

Debit

Credit

$84,000$

$($To record the impairment.$)$

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Solution

List of Accounts

Attempts: $3$ of $3$ used

$($b$)$

What is the new cost basis of the municipal bonds?

New cost basis of the municipal bonds

$

Given that the maturity value of the bonds is $$732,000,$ should Vaughn Corporation amortize the difference between the carrying amount and the maturity value over the life of the bonds?