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.DateStatedMarketPremiumBond InterestInterestAmortizationAmortized CostJan. 1, 2020 ? Dec. 31, 2020$1600 ? ? ? Dec. 31, 2021$1600 ? ? ? 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 $33,280.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). DateAccount NameDr.Cr.c.Jan. 1, 2020Investment in HTM Securities? ? Cash ? ? d.Dec. 31, 2020Cash$1600 ? Interest Revenue ? ? Investment in HTM Securities ? ? Dec.nswe 31, 2021Cash$1600 ? Interest Revenue ? Investment in HTM Securities ? ?

Bond Amortization Effective Rate of Interest Method - Effective Rate of Interest Method is used to prepare a bond amortization schedule to calculate the amount of interest as per market rate over the issue price. a) Amortization Schedule Present Value Of Proceeds= $32,000(1+0.045)10 = $20,645.16 b)

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FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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				?
Dec. 31, 2020	$1600	?	?	?
Dec. 31, 2021	$1600	?	?	?

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 $33,280.

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	?	?
		Cash	?	?
d.	Dec. 31, 2020	Cash	$1600	?
		Interest Revenue	?	?
		Investment in HTM Securities	?	?
	Dec.nswe 31, 2021	Cash	$1600	?
		Interest Revenue	?
		Investment in HTM Securities	?	?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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