True/Fales

1. Chips Co holds debt securities of Albers Inc. The amortized cost of the same is $ 11,000. The fair value of the investment is also $ 11,000. Due to a decline in the credit rating of Albers Inc. caused by liquidity issues that the company is facing, its credit risk goes up. This will reduce the fair value of the investment as the market yield of the bond will go up

2. Chips Co holds debt securities of Albers Inc. as Available-For-Sale Investments. The amortized cost of the same is $ 11,000. The fair value of the investment is also $ 11,000. Due to a decline in the credit rating of Albers Inc. caused by liquidity issues that the company is facing, its credit risk goes up. The fair value of the the bond investment drops to $ 10,000. The net income of the company will drop by $ 1000 because of this.

3. Chips Co holds debt securities of Albers Inc. as a trading security. The amortized cost of the same is $ 11,000. The fair value of the investment is also $ 11,000. Due to a decline in the credit rating of Albers Inc. caused by liquidity issues that the company is facing, its credit risk goes up. This will reduce the face value of the bond to $ 10,000. Its net income will go down by $ 1000.