A held-to-maturity debt investment with a book value of $6,000,000 is determined to be impaired due to concerns about the investee's ability to pay principal and interest. The investment's current market value is $4,000,000. Assume the bonds were originally sold at par. Which statement is true?

Question

Quizplus · Accepted Answer

For held-to-maturity debt investments, an impairment loss is recognized in income when the fair value falls below the book value and the loss is considered other than temporary. In this case, the $2,000,000 difference between the book value and the current market value is recognized as a loss in the income statement.

A Held-To-Maturity Debt Investment with a Book Value of $6,000,000