1. Under what circumstances is an investment is classified as

• Held to-maturity investment?
• Available-for-sale investment?

2. In the current year, a company sells all its held-to-maturity investments because the market values had appreciated significantly. Can other investments now be classified as held to maturity?

3. An investor owns 40% of the shares of another company. Is this evidence enough to conclude that significant influence exists?

4. What are bonds and why are they used?

5. An available-for-sale investment is bought for $10,000, and has a fair value of $14,000 at the end of the first year, $16,000 at the end of the second year, and is sold for $21,000 in the third year. What amount of gain is recorded in net income in the third year? 2. Assume that the same investment is classified as a trading investment. What gain is included in income in the third year?