8.1 Learning Objective 8-1
1) Investments are classified as available-for-sale securities, trading securities or held-to-maturity securities.
2) An investment is a held-to-maturity investment in bonds if it is management's intent to sell the investment before the maturity date.
3) If the stated rate of interest on a bond exceeds the market rate of interest, the bond will sell at a premium.
4) The stated interest rate on a bond determines the amount of interest the issuer is expected to pay annually or semiannually.
5) The market prices of bonds fluctuate inversely with market interest rates.
6) If the market interest rate is greater than the coupon rate of interest on a bond, the bond will sell at a discount.
7) If bonds are issued at a premium, the carrying amount of the bonds will be greater than the face value of the bonds until the maturity date.
8) If $100,000 face value bonds are issued at 103, the bonds are selling for $103,000.
9) Bond investments are initially recorded at cost.
10) The carrying amount of bonds at maturity should be equal to the face value of the bonds.