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On January 1 of the current year, Baker Corp. purchased $30,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31

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On January 1 of the current year, Baker Corp. purchased $30,000 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 a. Were the bonds purchased at a discount or premium? Premium b. Prepare a bond amortization schedule for the current year (Year 1) and the following year (Year 2) using the effective interest method. Note: Round each amount entered into the schedule to the nearest whole dollar. Date Stated Interest Market Interest Premium Bond Amortization Amortized Cost Jan. 1, Year 1 $ 0 Dec. 31, Year 1 $ 0 $ 0 $ Dec. 31, Year 2 0 0 Oo 0 0 0 0

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