The definition of a debt is held-to-maturity is a debt which the company has both the ability and intent to

hold until maturity. Debt held to maturity is classified as a long-term investment and it is recorded at the
market value (original cost) on the date of acquisition. All changes in market value are ignored for debt
held to maturity.

Debt held to maturity is shown on the balance sheet at the amortized acquisition cost. To find the
amortized acquisition cost the securities are amortized like a mortgage or a bond.

The accounting records show the debt at the amortized cost (face amount plus premium/less discount)
and the difference between the maturity value and the cost of the bonds is amortized to the income
statement over the life of the bonds.

In order to record the interim interest revenue and report the investment on the balance sheet, it is
necessary to prepare an amortization schedule for the debt.

The first interest payment is $1,600, but since the company paid a premium, the effective interest earned
is $1,302 (net the amortization of the premium).

First-In, First-Out (FIFO) is one of the methods commonly used to estimate the value
of inventoryon hand at the end of an accounting period and the cost of goods sold during the
period. This method assumes that inventory purchased or manufactured first is sold first and
newer inventory remains unsold. Thus cost of older inventory is assigned to cost of goods
sold and that of newer inventory is assigned to ending inventory. The actual flow of
inventory may not exactly match the first-in, first-out pattern.

First-In, First-Out method can be applied in both the periodic inventory system and
the perpetual inventory system. The following example illustrates the calculation of ending
inventory and cost of goods sold under FIFO method:

Example
Use the following information to calculate the value of inventory on hand on Mar 31 and
cost of goods sold during March in FIFO periodic inventory system and under FIFO
perpetual inventory system.

Mar 1 Beginning Inventory 68 units @ $15.00 per unit

5 Purchase 140 units @ $15.50 per unit

9 Sale 94 units @ $19.00 per unit

11 Purchase 40 units @ $16.00 per unit

16 Purchase 78 units @ $16.50 per unit

20 Sale 116 units @ $19.50 per unit

29 Sale 62 units @ $21.00 per unit

Solution

FIFO Periodic

Units Available for Sale = 68 + 140 + 40 + 78 = 326

Units Sold = 94 + 116 + 62 = 272

Units in Ending Inventory = 326 − 272 = 54

Cost of Goods Sold Units Unit Cost Total

Sales From Mar 1 Inventory 68 $15.00 $1,020

Sales From Mar 5 Purchase 140 $15.50 $2,170

Sales From Mar 11 Purchase 40 $16.00 $640

Sales From Mar 16 Purchase 24 $16.50 $396

272 $4,226

Ending Inventory Units Unit Cost Total

Inventory From Mar 16 Purchase 54