D the investor intends to hold the investment to

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Unformatted text preview: vestor will be required to sell the investment . prior to recovering the amortized cost of the investment less any credit losses arising in the current year. D. The investor intends to hold the investment to maturity. Nichols Corporation purchased $100,000 of Holly Inc. 6% bonds at par with the intent and ability to hold the bonds until they matured in 2017, so Nichols classifies its investment as held to maturity. Unfortunately, a combination of problems at Holly and in the debt market caused the fair value of the Holly investment to decline to $70,000 during 2013. Nichols calculates that, of the $30,000 drop in fair value, $10,000 of it relates to credit losses and $20,000 relates to noncredit losses. 119.Assume that Nichols concludes that the Holly bonds are other-than-temporarily impaired because Nichols is planning to sell the bonds in the near future. Before-tax net income for 2013 will be reduced by: A. $0. B. $10,000. C. $20,000. D. $30,000. 120.Assume that Nichols concludes that the Holly bonds are other-than-temporarily impaired because Nichols believes it is more likely than not that it will have to sell the Holly bonds before the bonds have a chance to recover their fair value. Before-tax net income for 2013 will be reduced by: A. $0. B. $10,000. C. $20,000. D. $30,000. 121.Assume that Nichols concludes that the Holly bonds are other-than-temporarily impaired because Nichols calculates that the bonds have incurred credit losses. Before-tax net income for 2013 will be reduced by: A. $0. B. $10,000. C. $20,000. D. $30,000. 122.Dicker Furriers purchased 1,000 shares of Loose Corporation stock on January 10, 2012, for $800 per share and classified the investment as securities available for sale. Loose's market value was $400 per share on December 31, 2012, and the decline in value was viewed as temporary. As of December 31, 2013, Dicker still owned the Loose stock whose market value had declined to $100 per share. The decline is due to a reason that's judged to be other than temporar...
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