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  3. 8. cromwell company has a debt investment in the b

8. Cromwell Company has a debt investment in the bonds issued by Hsu Inc. The...

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8. Cromwell Company has a debt investment in the bonds issued by Hsu Inc. The bonds were purchased at par for $500,000 and, at the end of 2001, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for collection. Hsu is facing a tough economic environment and informs all of its investors that it will be unable to make all payments according to the contractual terms. The controller of Cromwell has prepared the following revised expected cash flow forecast for this bond investment. Dec. 31 2004 2005 2006 Total cash flows Expected Cash Flows $ 35,000 35,000 385,000 $455,000 Required: a. What is the impairment loss for Cromwell on December 31, 2003? (Show your work.) b. Prepare the entry to record the impairment loss for Cromwell on December 31, 2003. c. On January 15, 2004, Hsu receives a major capital infusion from a private equity investor. Hsu informs Cromwell that the bonds now will be paid according to the contractual terms. Briefly describe how Cromwell would account for the bond investment in light of this new information

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