PROBLEM: On January 2, 2018, Bronze Company purchased a debt investment for $100,000 and measures it at amortized cost. The debt has an interest rate of 5% over its contractual term of 10 years and has a 5% effective interest rate. On December 31, 2018, the fair value of the debt instrument has decreased to $95,000 as a result of changes in market interest rates. Bronze determines that there has not been a significant increase in credit risk since initial recognition and that expected credit losses should be measured at an amount equal to 12-month expected credit losses, which amounts to $3,000. What amount of loss, if any, will Bronze report in net income? What amount of loss will Bronze report in other comprehensive income? Prepare the journal entry for the impairment loss, if needed.
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