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Indigo Corporation has municipal bonds classified as a held-to-maturity at December 31,2025. These bonds have...

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Accounting

Indigo Corporation has municipal bonds classified as a held-to-maturity at December 31,2025. These bonds have a par value of
$871,000, an amortized cost of $871,000, and a fair value of $799,000. The company believes that impairment accounting is now
appropriate for these bonds.
(a)
Correct Answer (Used)
Prepare the journal entry to recognize the impairment. (List debit entry before credit entry. 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
Credit
Bad Debt Expense
Allowance for Doubtful Accounts
72,000
(b)
What is the new carrying value of the municipal bonds?
New carrying value $
Given that the maturity value of the bonds is $871,000, should Indigo Corporation amortize the difference between the carrying
amount and the maturity value over the life of the bonds?
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