On January 1 of Year 1, Baker Corp. purchased $40,000 of Chocolate Inc. bonds. These bonds...
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On January 1 of Year 1, Baker Corp. purchased $40,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature in 10 years on December 31. The investment is classified as a held-to-maturity investment because Baker has the intent and the ability to hold the bonds for 10 years. The effective rate on the bonds is 4.5%. Amortization Schedule Journal Entries and Balance Sheet Presentation c. Prepare the journal entry for the purchase of the investment on January 1 of Year 1. Date Account Name Jan. 1, Year 1 Investment in Stock Cash To record purchase of investment. Dr. Cr. 40,000 0x 0 40,000 d. Prepare the journal entries to record interest received on December 31 of Year 1 and December 31 of Year 2. Date Dec. 31, Year 1 Account Name To record interest received. Dec. 31, Year 2 To record interest received. Dr. Cr. 0 0 x 0 0 0 0 x 0 0 0 0 0 0 e. Indicate the carrying value of the Chocolate bonds on Baker's December 31 of Year 2 balance sheet assuming that the fair value of the bonds on December 31 of Year 2 was $41,600. $ 0 On January 1 of Year 1, Baker Corp. purchased $40,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature in 10 years on December 31. The investment is classified as a held-to-maturity investment because Baker has the intent and the ability to hold the bonds for 10 years. The effective rate on the bonds is 4.5%. Amortization Schedule Journal Entries and Balance Sheet Presentation c. Prepare the journal entry for the purchase of the investment on January 1 of Year 1. Date Account Name Jan. 1, Year 1 Investment in Stock Cash To record purchase of investment. Dr. Cr. 40,000 0x 0 40,000 d. Prepare the journal entries to record interest received on December 31 of Year 1 and December 31 of Year 2. Date Dec. 31, Year 1 Account Name To record interest received. Dec. 31, Year 2 To record interest received. Dr. Cr. 0 0 x 0 0 0 0 x 0 0 0 0 0 0 e. Indicate the carrying value of the Chocolate bonds on Baker's December 31 of Year 2 balance sheet assuming that the fair value of the bonds on December 31 of Year 2 was $41,600. $ 0
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Related Book For
Financial Reporting and Analysis
ISBN: 978-1259722653
7th edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
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