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A company holds a $100,000 face value corporate bond, bought January 1, 2019, paying 3% annually on December 31, and maturing December 31, 2021. The company paid $102,884 for the bond, to yield 2%. The company categorizes the bond as a held-to-maturity investment, and its accounting year ends December 31. Round answers to the nearest dollar.
-Assume the market value of the bond on December 31, 2019 is $70,000, and no previous impairment has been reported. The decline in value is due to credit losses. What impairment loss is reported on the company's 2019 income statement?

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Quizplus · Accepted Answer

Amortized cost (book value) at the end of 2019, after interest revenue is recorded, is $101,942. Therefore the impairment loss is $70,000 - $101,942 = $31,942, reported in income.

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