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The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
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The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
Year 1 | ||
July | 1 | Issued $58,800,000 of 20-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of $50,482,396. Interest is payable semiannually on December 31 and June 30. |
Dec. | 31 | Paid the semiannual interest on the bonds. The bond discount amortization of $207,940 is combined with the semiannual interest payment. |
31 | Closed the interest expense account. | |
Year 2 | ||
June | 30 | Paid the semiannual interest on the bonds. The bond discount amortization of $207,940 is combined with the semiannual interest payment. |
Dec. | 31 | Paid the semiannual interest on the bonds. The bond discount amortization of $207,940 is combined with the semiannual interest payment. |
31 | Closed the interest expense account. | |
Year 3 | ||
June | 30 | Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $7,485,844 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) |
Required:
1. | Journalize the entries to record the transactions. Round all amounts to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles. |
2. | Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2. |
3. | Determine the carrying amount of the bonds as of December 31, Year 2. |