Answered: The following transactions were…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:

Year 1
July 1.	Issued $3,460,000 of five-year, 7% callable bonds dated July 1, Year 1, at a market (effective) rate of 9%, receiving cash of $3,186,222. Interest is payable semiannually on December 31 and June 30.
Oct. 1.	Borrowed $170,000 by issuing a 10-year, 8% installment note to Nicks Bank. The note requires annual payments of $25,335, with the first payment occurring on September 30, Year 2.
Dec. 31.	Accrued $3,400 of interest on the installment note. The interest is payable on the date of the next installment note payment.
31.	Paid the semiannual interest on the bonds. The bond discount amortization of $27,378 is combined with the semiannual interest payment.
Year 2
June 30.	Paid the semiannual interest on the bonds. The bond discount amortization of $27,378 is combined with the semiannual interest payment.
Sept. 30.	Paid the annual payment on the note, which consisted of interest of $13,600 and principal of $11,735.
Dec. 31.	Accrued $3,165 of interest on the installment note. The interest is payable on the date of the next installment note payment.
31.	Paid the semiannual interest on the bonds. The bond discount amortization of $27,378 is combined with the semiannual interest payment.
Year 3
June 30.	Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $164,266 after payment of interest and amortization of discount have been recorded. Record the redemption only.
Sept. 30.	Paid the second annual payment on the note, which consisted of interest of $12,661 and principal of $12,674.

Required:

Round all amounts to the nearest dollar.

1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank.

Date	Debit	Credit
Year 1
July 1	fill in the blank 2	fill in the blank 3
	fill in the blank 5	fill in the blank 6
	fill in the blank 8	fill in the blank 9

Oct. 1	fill in the blank 11	fill in the blank 12
	fill in the blank 14	fill in the blank 15

Dec. 31-Note	fill in the blank 17	fill in the blank 18
	fill in the blank 20	fill in the blank 21

Dec. 31-Bond	fill in the blank 23	fill in the blank 24
	fill in the blank 26	fill in the blank 27
	fill in the blank 29	fill in the blank 30

Year 2
June 30	fill in the blank 32	fill in the blank 33
	fill in the blank 35	fill in the blank 36
	fill in the blank 38	fill in the blank 39

Sept. 30	fill in the blank 41	fill in the blank 42
	fill in the blank 44	fill in the blank 45
	fill in the blank 47	fill in the blank 48
	fill in the blank 50	fill in the blank 51

Dec. 31-Note	fill in the blank 53	fill in the blank 54
	fill in the blank 56	fill in the blank 57

Dec. 31-Bond	fill in the blank 59	fill in the blank 60
	fill in the blank 62	fill in the blank 63
	fill in the blank 65	fill in the blank 66
Year 3
June 30	fill in the blank 68	fill in the blank 69
	fill in the blank 71	fill in the blank 72
	fill in the blank 74	fill in the blank 75
	fill in the blank 77	fill in the blank 78

Sept. 30	fill in the blank 80	fill in the blank 81
	fill in the blank 83	fill in the blank 84
	fill in the blank 86	fill in the blank 87
	fill in the blank 89	fill in the blank 90

2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2.

a. Year 1 $fill in the blank 91

b. Year 2 $fill in the blank 92

3. Determine the carrying amount of the bonds as of December 31, Year 2.

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