Question

PR 14-4A Entries for bonds payable and installment note transactions OBJ. 3,4 The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 2016 July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, 2016, at a mar- ket (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30. Oct. 1. 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, 2017. Dec. 31. Accrued $3,000 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 $261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. 2017 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Sept. 30. Paid the annual payment on the note, which consisted of interest of $12.000 and principal of $28,673. Dec. 31. Accrued $2,570 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 $261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. 2018 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is 59,120.961 after payment of interest and amor tization of discount have been recorded. (Record the redemption only) Sept. 30. Paid the second annual payment on the note, which consisted of interest of $10,280 and principal of $30,393. Instructions 1. Journalize the entries to record the foregoing transactions. Round all amoun nearest dollar 2. Indicate the amount of the interest expense in a 2016 and (b) 2017 3. Determine the carrying amount of the bonds as of December 31, 2017

I just need help with number 3. I can't figure out what the discount amortized is for the different years

Answer 1

	Amount of Bond Discount =74000000-63532267	$10,467,733
		AMORTIZATION SCHEDULE
			(11/2)=5.5% *74 million	Market rate(13/2)=6.5% *Previous Book value
		A	B	C	D=C-B	E	F	G=F-E
	CALCULATION OF INTEREST EXPENSES	Date	Interest payment	Interest Expense	Amortization of Discount	Debit Balance in Bond Discount Account	Credit Balance in Bond Payable Account	Carrying value of the Bond
		July1,2016				$10,467,733	$74,000,000	$63,532,267
	(6.5%*63532267)	Dec31,2016	$4,070,000	$4,129,597	$59,597.35	$10,408,136	$74,000,000	$63,591,864
	(6.5%*63591864)	June30,2017	$4,070,000	$4,133,471	$63,471.18	$10,344,664	$74,000,000	$63,655,336
	(6.5%*63655336)	Dec31,2017	$4,070,000	$4,137,597	$67,596.81	$10,277,068	$74,000,000	$63,722,932
	Initial Carrying Amount of bonds	$63,532,267
	Discount amortized on December ,31,2016	$59,597
	Discount amortized on June ,30,2017	$63,471
	Discount amortized on December ,31,2017	$67,597
	Carrying amount of bonds December 31,2017	$63,722,932