On December 1, Year 1, Axel Financial purchased $50,000 of bonds issued by Lamb Company at face value. The bonds mature in ten years. Axel’s intent was to sell the bonds soon to earn a profit on any short-term price fluctuations. The fair value of those bonds decreased by $5,000 to $45,000 on December 31, Year 1. Which of the following statements are correct with regards to this investment? (Select all that apply.)

• The bonds should be reported among current assets in the balance sheet at December 31, Year 1.

• At December 31, Year 1, the $5,000 decrease in fair value should be ignored.

• The bonds should be reported at their fair value of $45,000 in the balance sheet at December 31, Year 1. 

• An unrealized holding gain in the amount of $5,000 should be included in net income in the income statement prepared for Year 1.

Answer rating: 100% (QA)

The bonds should be reported among current assets in the balan... View the full answer