Timmerman Ltd. purchased $1 million of 10-year bonds at face value (100) in 2012. The bonds were

Question:

Timmerman Ltd. purchased $1 million of 10-year bonds at (100) in 2012. The bonds were trading at 105 on December 31, 2012.
(a) At what amount would the bonds be reported in the December 31, 2012, statement of financial position if management intended to hold the bonds until maturity?
(b) How would your answer differ if management were holding the bonds for trading purposes? Explain why the investment is reported differently depending on management's intentions.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...