Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

As the time to maturity decreases, what typically happens to the carrying value of a discount bond?

It decreases further below the bond's face value.

It remains constant throughout the bond's life.

It increases toward the bond's face value.

It fluctuates unpredictably with market interest rates.

Previous problemNext problem

Verified step by step guidance

Understand the concept of a discount bond: A discount bond is issued at a price below its face value, and its carrying value increases over time as it approaches maturity.

Recognize the relationship between the carrying value and the bond's face value: The carrying value of a discount bond gradually increases toward the bond's face value as the bond nears its maturity date.

Learn the accounting principle behind this: The increase in carrying value is due to the amortization of the bond discount, which is systematically allocated over the bond's life using methods like the straight-line method or the effective interest method.

Consider the time to maturity: As the time to maturity decreases, the amortization of the discount accelerates, causing the carrying value to move closer to the bond's face value.

Eliminate incorrect options: The carrying value does not decrease further below the face value, remain constant, or fluctuate unpredictably with market interest rates. It consistently increases toward the bond's face value as maturity approaches.