Bloom Corporation purchased $1,000,000 of Taylor Company 5% bonds, at their face amount, with the intent and ability to hold the bonds until they matured in 2028, so Bloom classifies its investment as HTM. Unfortunately, a combination of problems at Taylor Company and in the debt securities market caused the fair value of the Taylor investment to decline to $600,000 during 2024. The following are the two alternative scenarios that should be analyzed independent of each other.

1. Bloom now believes it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to recover their fair value. Of the $400,000 decline in fair value, Bloom attributes $250,000 to credit losses, and $150,000 to noncredit losses.

2. Bloom does not plan to sell the Taylor bonds prior to maturity, and does not believe it is more likely than not that it will have to sell the Taylor bonds before the bonds have a chance to recover their fair value. Of the $400,000 decline in fair value, Bloom attributes $250,000 to credit losses, and $150,000 to noncredit losses.

Required:

Prepare appropriate entry(s) at December 31, 2024, and indicate how the scenario will affect the 2024 income statement (Ignoring income taxes).

Journal entry worksheet Record the entry for credit or noncredit losses. Note: Enter debits before credits. Indicate how the scenario will affect the 2024 income statement (Ignoring income taxes). Note: Amounts to be deducted should be indicated with a minus sign. Complete this question by entering your answers in the tabs below. Prepare appropriate entry(s) at December 31, 2024. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Journal entry worksheet Record the entry for credit or noncredit losses. Note: Enter debits before credits