Which of the following statements regarding the accounting for held-to-maturity securities is incorrect?
- To classify an investment as held-to-maturity, the company must have either the intent or the ability to hold the security until maturity.
- If a debt security is purchased at par value, it will be valued and reported at the purchase price until it matures.
- A held-to-maturity security can be reported as either a current or a non-current liability.
| Patton Company purchased $400,000 of 10% bonds of Scott Co. on January 1, 2011, paying $376,100. The bonds mature January 1, 2021; interest is payable each July 1 and January 1. The discount of $23,900 provides an effective yield of 11%. Patton Company uses the effective-interest method and plans to hold these bonds to maturity. For the year ended December 31, 2011, Patton Company should report interest revenue from the Scott Co. bonds of (Points : 5) |
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