Recording Entries for HTM Debt Securities Effective Interest Method

On January 1, 2020, Baker Corp. purchased $60,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature December 31, 2029. 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

a. Were the bonds purchased at a discount or premium?

AnswerDiscountPremium

b. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method.

Note:Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule.

Date	Stated	Market	Premium	Bond
	Interest	Interest	Amortization	Amortized Cost
Jan. 1, 2020				Answer
Dec. 31, 2020	Answer	Answer	Answer	Answer
Dec. 31, 2021	Answer	Answer	Answer	Answer

Recording Entries for HTM Debt Securities Effective Interest Method On January 1, 2020, Baker Corp. purchased $60,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature December 31, 2029. 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 a. Were the bonds purchased at a discount or premium? b. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method. Note:Round each amount entered into the schedule to the nearest whole dollar. Use the rounded amount for later calculations in the schedule. Date Stated Market Premium Bond Amortization Amortized Cost Interest Interest $ Jan. 1, 2020 Dec. 31, 2020 $ Dec. 31, 2021 $ $ $ $ $ $ $