Question

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

Year 1
July 1.	Issued $2,470,000 of five-year, 6% callable bonds dated July 1, Year 1, at a market (effective) rate of 8%, receiving cash of $2,269,661. Interest is payable semiannually on December 31 and June 30.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discount amortization of $20,034 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 $20,034 is combined with the semiannual interest payment.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discount amortization of $20,034 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 $120,203 after payment of interest and amortization of discount have been recorded. (Record the redemption only.)

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.

Date	Account	Debit	Credit
Year 1
July 1	Cash
	Discount on bonds payable
	Bonds payable
Dec. 31-Bond	Interest expense
	Discount on bonds payable
	Cash
Dec. 31-Closing	Income summary
	Interest expense
Year 2
June 30	Interest expense
	Discount on bonds payable
	Cash
Dec. 31-Bond	Interest expense
	Discount on bonds payable
	Cash
Dec. 31-Closing	Income summary
	Interest expense
Year 3
June 30	Bonds payable
	Loss on redemption of bonds
	Discount on bonds payable
	Cash

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

a. Year 1   $

b. Year 2   $

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

Answer 1

The answer has been presented in the supporting sheets. All the parts has been solved with detailed explanation and formulas and format. For detailed answers refer to the supporting sheets.

Answer 3 Requirement 1 Debit 4 Date Account Credit 5 Year 1 6 Julv.1 Cash 2269661 Discount on bonds Pavable 200339 Bonds Payable 2470000 10 Dec. 31 Bond Interest expense 94134 Discount on bonds Pavable 20034 Cash (2470000.06/2 12 74100 13 14 Dec.31 closin Income summa 94134 15 Interest expense 94134 16 17 Year2 18 June.30 Interest expense 94134 Discount on bonds Pavable 19 20034 Cash (2470000.06/2 20 74100 21 22 Dec. 31 Bond Interest expense 94134 Discount on bonds Pavable 23 20034 Cash (2470000.06/2 24 74100 25

26 Dec. 31 closing Income summa 94134 27 94134 Interest expense 28 29 Year 3 Bonds payable 30 une.30 2470000 31 Loss on redemption of bonds 70803 Discount on bonds pavable (200339-(20034*4 32 120203 cash (2470000*98/100 2420600 34. 35 Requirement2 36 Interest expense 37 Year 1 - cash interest paid+ discount amortized 38 74100+20034 $94134 39 40 41 Thus year 1 interest expense $94134 42 43 Year 2 - cash interest paid + discount amortized 74100+20034 $94134 45 46 47 Thus year 2 interest expense $94134 48

48 49 Requirement 3 50 Carrying amount of bond as of december 31, Year 2 51 Bonds Payable - Unamortized discount 522470000 (200339-(20034 3)) 53 2470000- (200339-60102) 542470000 140237 55$2329763 56 57 Thus carrying amount of bond as of december 31, Year 2 $2,329,763 58