Question
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. Axels
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. Axels 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.)
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The bonds should be reported among current assets in the balance sheet at December 31, Year 1.
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At December 31, Year 1, the $5,000 decrease in fair value should be ignored.
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The bonds should be reported at their fair value of $45,000 in the balance sheet at December 31, Year 1.
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An unrealized holding gain in the amount of $5,000 should be included in net income in the income statement prepared for Year 1.
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