Question

the following instructions were ckmpleted by Winklevoss inc., whose fiscal year is the calander year

Issued 74,000,000 of 20-year, 11% callable bonds dated July 1, 20Y1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Dec. 31 20Y2 30 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment Dec 31 2043 June 30 Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $9,420,961 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) 2071 and (b) 2012 3. Determine the carrying amount of the bonds as of December 31 2042

Answer 1

1.Journal Entries:

Date	Particulars	LF	Debit	Credit
20Y1 July 1	Cash A/c                                         Dr		$ 635,32,267
	Discount on Bonds Payable            Dr		$ 104,67,733
	To Bonds Payable A/c			$ 740,00,000
	(To record issue of Bonds at Discount)
December 31	Interest Expense                            Dr		$43,31,693
	To Discount on Bonds Payable			$2,61,693
	To Cash A/c			$40,70,000
	(To record Semi-annual interest payment and amortization on bonds.)
20Y2
June 30	Interest Expense                              Dr		$43,31,693
	To Discount on Bonds Payable			$2,61,693
	To Cash A/c			$40,70,000
	(To record Semi-annual interest payment and amortization on bonds.)
Dec 31	Interest Expense                             Dr		$43,31,693
	To Discount on Bonds Payable			$2,61,693
	To Cash A/c			$40,70,000
	(To record Semi-annual interest payment and amortization on bonds.)
20Y3
June 30	Bonds Payable                                Dr		$740,00,000
	Loss on redemption of Bonds		$79,40,961
	To Discount on Bonds Payable			$94,20,961
	To Cash			$725,20,000
	(To record Redemption on Bonds)

2.   Amount of Interest Expense in 20Y1 is $43,31,693 .

      Amount of Interest Expense in 20Y2 is $86,63,386 . [$43,31,693+$43,31,693].

3. Carrying amount of Bonds as of December 31,20Y2 is $732,14,921.

     Carrying amount = Face value – Discount on Bonds Payable.