Asked by Whian Bester on Jul 29, 2024

verifed

Verified

How is the premium or discount on held-to-maturity bond investments presented on the balance sheet?

A) as a part of the cost of the investment and amortized over a period not to exceed five years
B) as a part of the cost of the investment and amortized over the remaining life of the bonds
C) in a separate account that is reported separately from the bonds and amortized over the remaining life of the bonds
D) in a separate account that is reported separately from the investment account and not amortized

Bond Investments

Financial investments in debt securities issued by corporations or governments, which pay interest and are meant to be repaid at maturity.

Amortized

The gradual reduction of a debt over time by making regular payments that cover both principal and interest.

Held-To-Maturity

Held-to-maturity refers to investment securities that a company has the intent and ability to hold until a specified maturity date.

  • Ascertain and administer the accounting strategies for premiums, discounts, and amortization applicable to bond investments.
verifed

Verified Answer

VH
Vanessa HerreraAug 03, 2024
Final Answer :
B
Explanation :
The premium or discount on held-to-maturity bond investments is presented on the balance sheet as a part of the cost of the investment and amortized over the remaining life of the bonds. This is done through the use of the effective interest rate method which takes into account the purchase price, interest payments, and the bond's maturity value to calculate the amortization of the premium or discount over the remaining life of the bond.