Final answer:
It is false that a premium or discount on the fair value of stock received by a private-purpose trust fund should be amortized. The change in fair value is reflected in the fund balance or net position, not through amortization.
Step-by-step explanation:
The statement regarding the fair value of stock received by a private-purpose trust fund differing from the par value of the stock and the premium or discount being amortized over the remaining life of the stock is false. Typically, in governmental accounting, which a private-purpose trust fund falls under, changes in the fair value of investments are recorded as an increase or decrease in the fair value of assets, not amortized over the life of the investment. The fund balance or net position of the fund would reflect the change in fair value.
When accounting for stocks and bonds, it's essential to understand the concept of present discounted value. This principle is used to determine what an investor is willing to pay in the present for future benefits, including capital gains from the sale of stocks and potential dividends. With bonds, if interest rates decrease after issuance, the bond's value increases; conversely, if rates increase, the value decreases.