Question

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

2016
July	1	Issued $71,100,000 of 20-year, 12% callable bonds dated July 1, 2016, at a market (effective) rate of 14%, receiving cash of $61,621,133. Interest is payable semiannually on December 31 and June 30.
Oct.	1	Borrowed $250,000 by issuing a six-year, 5% installment note to Nicks Bank. The note requires annual payments of $49,254, with the first payment occurring on September 30, 2017.
Dec.	31	Accrued $3,125 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 $236,972 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 $236,972 is combined with the semiannual interest payment.
Sept.	30	Paid the annual payment on the note, which consisted of interest of $12,500 and principal of $36,754.
Dec.	31	Accrued $2,666 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 $236,972 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 $8,530,979 after payment of interest and amortization of discount have been recorded. (Record the redemption only.)
Sept.	30	Paid the second annual payment on the note, which consisted of interest of $10,662 and principal of $38,592.

Required:

1.	Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar. Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.
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.

Answer 1

the question ssays to use exact wordings of chart of accounts. since i don't have it I have used my own wordings. Pleas change them according to the chart provided to you

1.

2016
Jul-01	Cash A/c	Dr	61,621,133
	Discount on Bonds A/c	Dr	9,478,867
	To 12% Callable Bonds A/c			71,100,000
Oct-01	Cash A/c	Dr	250,000
	To 5% Note Payable A/c			250,000
Dec-31	Interest on Note Payable A/c	Dr	3,125
	To Interest Payable on Notes A/c			3,125
Dec-31	Interest on Bonds A/c	Dr	4,502,972
	To Cash A/C			4,266,000
	To Discount on Bonds A/c			236,972
Dec-31	Income summary A/c	Dr	4,506,097
	To Interest on Note Payable A/c			3,125
	To Interest on Bonds A/c			4,502,972
2017
Jun-30	Interest on Bonds A/c	Dr	4,502,972
	To Cash A/C			4,266,000
	To Discount on Bonds A/c			236,972
Sep-01	5% Note Payable A/c	Dr	36,754
	Interest Payable on Note A/c	Dr	3,125
	Interest on Note Payable A/c	Dr	9,375
	To Cash A/c			49,254
Dec-31	Interest on Note Payable A/c	Dr	2,166
	To Interest Payable on Notes A/c			2,166
Dec-31	Interest on Bonds A/c	Dr	4,502,972
	To Cash A/C			4,266,000
	To Discount on Bonds A/c			236,972
Dec-31	Income summary A/c	Dr	9,017,485
	To Interest on Note Payable A/c			11,541
	To Interest on Bonds A/c			9,005,944
2018
Jun-30	12% Callable Bonds A/c	Dr	71,100,000
	Loss on redemption A/c	Dr	7,108,979
	To Cash A/c			69,678,000
	To Discount on Bonds A/c			8,530,979
Sep-30	5% Note Payable A/c	Dr	38,592
	Interest Payable on Note A/c	Dr	2,166
	Interest on Note Payable A/c	Dr	8,496
	To Cash A/c			49,254

Interest on bonds=	71100000*12%/2
	4,266,000
Add: Amortisation value	236,972
Total Interest	4,502,972

Value of Bonds	71,100,000
Par Value	100
No of bonds issued	711,000
Called at	98
Value at which redeemed	69,678,000
Value of bonds	71,100,000
Balance in bond discount a/c	8,530,979
Carrying value	62,569,021
Loss on redemption	7,108,979

2.

Interest Expense	2016	2017
On Bonds	4,502,972	9,005,944
On Note Payable	3,125	11,541
	4,506,097	9,017,485

3.

Value of Bonds	71,100,000
Balance in discount on bonds A/c as on dec 31 2017	8,767,951
Carrying amount as on dec 31 2017	62,332,049