(b) Held-to-maturity securities, which include only
debt securities, are reported on the balance sheet at amortized
cost without adjustment to fair value. If the investment in bonds
had been classified as trading or available-for-sale, answer (c)
would be correct. Trading securities are reported at fair value
with holding gains or losses flowing through the income statements.
Available-for-sale securities are reported at fair value
with holding gains or losses reported as a component of other
comprehensive income. Cost and lower of cost or market are not
used as reporting bases for bond investments.