The City of Sycamore has investments in bonds. These bonds have an amortized cost of $1,996,000. At year end,the financial press reports a market value of $2,002,000 for these bonds. The original cost of the bonds was $1,992,000. The par value at maturity will be $2,000,000.The amount at which the investments would be reported is:

Question

Quizplus · Accepted Answer

The investments would be reported at their market value of $2,002,000 because the City of Sycamore follows the fair value accounting method for its investments. The amortized cost of $1,996,000 and original cost of $1,992,000 are not relevant under fair value accounting, as the investments are valued at their current market value. The par value at maturity is also not relevant for reporting purposes.

The City of Sycamore Has Investments in Bonds