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

c. Prepare the journal entry for the purchase of the investment on January 1, 2020. d. Prepare the journal entries to record interest received on December 31, 2020, and December 31, 2021. e. Indicate the carrying value of the Chocolate bonds on Bakers December 31, 2021, balance sheet assuming that the fair value of the bonds on December 31, 2021, was $62,400.

• Note: List multiple debits or credits (when applicable) in alphabetical order.
• Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero).

	Date	Account Name	Dr.	Cr.
c.	Jan. 1, 2020
d.	Dec. 31, 2020
	Dec. 31, 2021

e. Carrying value of investment, Dec. 31, 2021

$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 C. Prepare the journal entry for the purchase of the investment on January 1, 2020. d. Prepare the journal entries to record interest received on December 31, 2020, and December 31, 2021. e. Indicate the carrying value of the Chocolate bonds on Baker's December 31, 2021, balance sheet assuming that the fair value of the bonds on December 31, 2021, was $62,400. Note: List multiple debits or credits (when applicable) in alphabetical order. Note: If a line in a journal entry isn't required for the transaction, select "N/A" as the account names and leave the Dr. and Cr. answers blank (zero). . Date Account Name Dr. Cr. C. Jan. 1, 2020 d. Dec. 31, 2020 Dec. 31, 2021 e. Carrying value of investment, Dec. 31, 2021 $