Question: REQUIRED: Explain the difference between an equity security and a debt security and give an example of each. While other investments in the financial statements

  1. REQUIRED: Explain the difference between an equity security and a debt security and give an example of each. While other investments in the financial statements are updated to fair market value with an adjusting entry, explain why it makes sense that a held to maturity debt security is not adjusted to fair market value by adjusting entry. Finally, describe why a corporate bond purchased as an investment at a premium should be amortized over the life of the bond and what the impact is to interest revenue reported on the income statement and the impact to the carrying value of the investment (assume a held to maturity treatment of this bond investment). (HINT: use what you know about bonds & interest, but recognize this involves an investment asset not a liability.)

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