On January 1 of Year 1, Baker Corp. purchased $40,000 of Chocolate Inc. bonds. These bonds pay 5% interest annually on December 31 and mature in 10 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 Year 1 and 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 $ Dec. 31, Year 1 $ 2,000 1,800 x $ 200 x 40,000 x 0 x Dec. 31, Year 2 2,000 0 0 0 x