Recording Entries for HTM Debt Securities— Effective Interest Method On January 1, 2020, Baker Corp. purchased $32,000 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%. Prepare a bond amortization schedule for 2020 and 2021 using the effective interest method.
Recording Entries for HTM Debt Securities— Effective Interest Method On January 1, 2020, Baker Corp. purchased $32,000 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%.
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 | ?
|
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| Dec. 31, 2020 | $1600
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?
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?
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?
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| Dec. 31, 2021 | $1600
|
? |
? |
?
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c. Prepare the
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,
- 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 | Investment in HTM Securities | ?
|
?
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| Cash
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?
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?
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| d. | Dec. 31, 2020 | Cash | $1600
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?
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| Interest Revenue
|
?
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?
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| Investment in HTM Securities
|
?
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?
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| Dec.nswe 31, 2021 | Cash | $1600
|
?
|
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| Interest Revenue
|
?
|
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| Investment in HTM Securities
|
?
|
? |
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