Final answer:
The statement is true; when a company acquires long-term bond investments by paying cash, it is simply exchanging one type of asset for another, leaving the total assets unchanged.
Step-by-step explanation:
The statement "when a company acquires a long-term bond investment, by paying cash, total assets remain unchanged" is true. This is because when a company purchases bonds, it is converting one type of asset (cash) into another (bond investment). Let's elaborate with an example to provide a clear picture.Consider a company that has $100,000 in cash and decides to purchase $50,000 in long-term bonds. Upon this transaction, the cash account would decrease by $50,000, but the long-term investments account would increase by the same amount.
No net change in the total assets would occur, since the purchase merely reallocates the company's resources from one asset to another. Hence, total assets before and after the purchase of the bond remain the same.It is important to note that while the overall value of assets remains unchanged, the liquidity and risk profile of the company's assets may change. Cash is more liquid than bonds, and depending on the type of bonds purchased, there might be a change in the risk exposure. However, these factors do not affect the substance of the statement in question concerning total asset value.