ABC Grocers, Inc. has an investment in debt securities of$200,000 from Keller Company, a privately-held corporation. Thedebt security was purchased on 1/1/15 and the terms were asfollows: 5-year loan, annual interest rate 9% with interestpayments each December 31, beginning 12/31/15, and principalpayment at maturity on 12/31/19. ABC Grocers" intends to hold theinvestment to maturity. They classified the investment as HTM(held-to-maturity) for U.S. GAAP and as amortized cost for IFRSaccording to IFRS No. 9. At the end of 2015, ABC received the firstinterest payment of $18,000 but objective evidence indicated toABC's management that Keller was experiencing signaficant financialdifficulty due to sales projections not being realized. Based onthe financial difficulty of Keller, ABC's management revised thediscounted future cash flows estimate to $170,000 using theoriginal interest rate og9%, thus concluding that they had sufferedcredit losses of $30,000. The Company handles impairments accordingto IAS No. 39. On 12/31/15, ABC recorded the following for IFRS:Debit Credit Other-than-temporary (OTT) - impairment loss-I/S30,000 Investment in Debt Securities - Keller 30,000 On 12/31/15,ABC Grocers recorded the following for U.S. GAAP: Debit CreditOther-than-temporary (OTT) - Impairment loss - I/S 30,000 Discounton Investment in Debt Securities - Keller 30,000 At 12/31/16,Keller's Financial difficulties have significantly improved andtherefore, ABC's management decided the investment is no longerimpaired. Required: Assuming ABC has already recorded the receiptof the second interest payment, record necessary adjusting journalentries in their own adjusting journal entry workpaper and also inthe respective trial balance worksheet for 12/31/16.
