Debt Investments at Amortized Cost

Question 1

How do you report a debt investment that is held to maturity on financial statements?

Answer 1

Balance Sheet: Current portion is CA, the remaining portion is a non-current asset

Income Statement: Interest income

SCF: Investing Activity

Question 2

Types of questions:

Answer 2

Balances at:

• Acquisition Date
• Subsequent to acquisition
• Date of sale

Question 3

Debt Securities held-to maturity need to be tested for impairment annually, what are indicators of impairment?

Answer 3

Adverse general market condition
Regulatory issues
Technology changes

Question 4

If you think there might be an impairment, how do you determine the amount of the impairment?

Answer 4

You have to evaluate the carrying value to the fair value

Question 5

What is the journal entry for the interest payment?

Answer 5

Cash or accrued interest receivable DB
Discount on bonds DB
Interest Income CR