Question

Instructions The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1 July 1 Oct Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of $63,532 267. Interest is payable semiannually on December 31 and June 30. Borrowed $200,000 by issuing a six-year, 6% installment note to Nicks Bank. The note requires annual payments of $40,673, with the first payment occurring on September 30, Year 2. Dec 31 Accrued $3,000 of interest on the installment note. The interest is payable on the date of the next installment note payment. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 31 Year 2 June 30 Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Sept. Dec 30 31 Paid the annual payment on the note, which consisted of interest of $12,000 and principal of $28,673 Accrued $2,570 of interest on the installment note. The interest is payable on the date of the next

Answer 1

	DATE		ACCOUNT TITLES	DEBIT	CREDIT
	Year1	July,1	Cash	$63,532,267
			Bond Discount		$10,467,733	(74000000-63532267)
			Bond Payable		$74,000,000
	Year1	Oct,1	Cash	$200,000
			Notes Payable		$200,000
	Year1	Dec,31	Interest expenses	$3,000
			Interest payable		$3,000
	Year1	Dec,31	Interest expenses	$4,331,693		(4070000+261693)
			Bond discount		$261,693
			Cash		$4,070,000	(74000000*11%)/2
	Year2	June,30	Interest expenses	$4,331,693
			Bond discount		$261,693
			Cash		$4,070,000
	Year2	Sep,30	Interest expense	$9,000		(200000*6%*(9/12)
			Interest Payable	$3,000
			Note Payable	$28,673		(40673-9000-3000)
			Cash		$40,673
	Year2	Dec,31	Interest expenses	$2,570
			Interest payable		$2,570