Carow Company purchased on January 1, 2018, as an available for sale (AFS) security, $57,000...
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Carow Company purchased on January 1, 2018, as an available for sale (AFS) security, $57,000 of the 10%, 5-year bonds of Chaster Corporation for $5000 which provides a 12% return. Which of the following statements FALSE / TRUE regarding the required journal entries for the above bonds if we consider them to be AFS securities as opposed to HTM securities?
| 1. | They report both types of securities at year-end at amortized cost. |
| 2. | it uses the same journal entry to record the receipt of annual interest and discount amortization by Garfield. |
| 3. | If assumed to be AFS securities, it will adjust the Chaster Bonds to fair value at year-end. |
| 4. | It uses the same journal entry to record the purchase of the bonds by Garfield. |
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