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Investment in Debt Securities $-$ Keller Company

ABC Grocers, Inc. has an investment in debt securities of $$200,000$ from Keller Company, a privately$-$held

corporation. The debt security was purchased on $1/1/15$ and the terms were as follows: $5-$year loan,

annual interest rate $9\%$ with interest payments each December $31,$ beginning $12/31/15,$ and principal

payment at maturity on $12/31/19.$ ABC Grocers" intends to hold the investment to maturity. They

classified the investment as HTM $($held$-$to$-$maturity$)$ for U$.$S$.$ GAAP and as amortized cost for IFRS

according to IFRS No$.9.$

At the end of $2015,$ ABC received the first interest payment of $$18,000$ but objective evidence indicated

to ABC's management that Keller was experiencing signaficant financial difficulty due to sales projections

not being realized.

Based on the financial difficulty of Keller, ABC's management revised the discounted future cash flows

estimate to $$170,000$ using the original interest rate og$9\%,$ thus concluding that they had suffered credit

losses of $$30,000.$ The Company handles impairments according to IAS No$.39.$

On $12/31/15,$ ABC recorded the following for IFRS:

Debit Credit

Other$-$than$-$temporary $($OTT$)-$ impairment loss$-$I$/$S $30,000$

Investment in Debt Securities $-$ Keller $30,000$

On $12/31/15,$ ABC Grocers recorded the following for U$.$S$.$ GAAP:

Debit Credit

Other$-$than$-$temporary $($OTT$)-$ Impairment loss $-$ I$/$S $30,000$

Discount on Investment in Debt Securities $-$ Keller $30,000$

At $12/31/16,$ Keller's Financial difficulties have significantly improved and therefore, ABC's management

decided the investment is no longer impaired.

Required: Assuming ABC has already recorded the receipt of the second interest payment, record necessary

adjusting journal entries in their own adjusting journal entry workpaper and also in the respective trial balance

worksheet for $12/31/16.$

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