On January 1 of the current year, Baker Corp. purchased $50,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature in ten 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 ScheduleJournal Entries and Balance Sheet Presentationc. Prepare the journal entry for the purchase of the investment on January 1. DateAccount NameDr.Cr.Jan. 1, Year 1 To record purchase of investment. d. Prepare the journal entries to record interest received on December 31 of Year 1 and December 31 of Year 2. DateAccount NameDr.Cr.Dec. 31, Year 1 To record interest received. Dec. 31, Year 2 To record interest received. e. Indicate the carrying value of the Chocolate bonds on Baker’s balance sheet on December 31, Year 2, assuming that the fair value of the bonds on that date was $52,000. $Answer Please answer all parts of the question.

The Investments in bonds are held till maturity. The Investments in bond is measured at amortized cost method. The Coupan rate is 5% and the Bond period is 10 years First of all, we have to calculate the current value of the bond as of January 01, Year 1 Computation of Bond Price as of January 01, Year 1Amortization table of investments in 5% BondThe bond is measured at an Amortized cost hence no fair value adjustments are required to be recognized. The Carrying amount of Investments in Bond at year ended year 2 is 51817 (See amortization table in step 2)

Answered: On January 1 of the current year, Baker…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

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Chapter1: Financial Statements And Business Decisions

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On January 1 of the current year, Baker Corp. purchased $50,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature in ten 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.

Date	Account Name	Dr.	Cr.
Jan. 1, Year 1

	To record purchase of investment.

d. Prepare the journal entries to record interest received on December 31 of Year 1 and December 31 of Year 2.

Date	Account Name	Dr.	Cr.
Dec. 31, Year 1


	To record interest received.
Dec. 31, Year 2


	To record interest received.

e. Indicate the carrying value of the Chocolate bonds on Baker’s balance sheet on December 31, Year 2, assuming that the fair value of the bonds on that date was $52,000.
$Answer

Please answer all parts of the question.

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