Whispering Corporation has municipal bonds classified as a held-to-maturity at December 31, 2020. These bonds have a par value of $792,000, an amortized cost of $792,000, and a fair value of $710,000. The company believes that impairment accounting is now appropriate for these bonds.
Prepare the journal entry to recognize the impairment.

The journal entry to recognize the impairment :

Impairment expense $ 82,000 (debit)

Accumulated Impairment - Bonds  $ 82,000 (credit)

Explanation:

Impairment of Bonds occurs when the Amortized Cost of the Bond exceeds the Fair value of the Bond.

Amortized Cost of the Bond is the Carrying amount of a bond effected for the interest and capital repayment

Fair Value of Bond is the price that the bond can be traded at on the market at arms length

Impairment Calculation  :

Amortized cost           $792,000

Less  fair value of        $710,000

Amortized Cost            $82,000