The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1 July 1. Issued $3,660,000 of five-year, 8% callable bonds dated July 1, Year 1, at a market (effective) rate of 10%, receiving cash of $3,377,386. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $28,262 is combined with the semiannual interest payment. Dec. 31. Closed the interest expense account. Year 2 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $28,262 is combined with the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $28,262 is combined with the semiannual interest payment. Dec. 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 $169,568 after payment of interest and amortization of discount have been recorded. (Record the redemption only.) Required: 1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank or enter "0". When required, round your answers to the nearest dollar. 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.

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

Year 1
July 1.	Issued $3,660,000 of five-year, 8% callable bonds dated July 1, Year 1, at a market (effective) rate of 10%, receiving cash of $3,377,386. Interest is payable semiannually on December 31 and June 30.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discount amortization of $28,262 is combined with the semiannual interest payment.
Dec. 31.	Closed the interest expense account.
Year 2
June 30.	Paid the semiannual interest on the bonds. The bond discount amortization of $28,262 is combined with the semiannual interest payment.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discount amortization of $28,262 is combined with the semiannual interest payment.
Dec. 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 $169,568 after payment of interest and amortization of discount have been recorded. (Record the redemption only.)

Required:

1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank or enter "0". When required, round your answers to the nearest dollar.

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.

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