Question

Entries for Bonds Payable, including bond redemption

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

Year 1
July 1.	Issued $6,350,000 of five-year, 7% callable bonds dated July 1, Year 1, at a market (effective) rate of 9%, receiving cash of $5,847,543. Interest is payable semiannually on December 31 and June 30.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discount amortization of $50,246 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 $50,246 is combined with the semiannual interest payment.
Dec. 31.	Paid the semiannual interest on the bonds. The bond discount amortization of $50,246 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 $301,475 after payment of interest and amortization of discount have been recorded. (Record the redemption only.)

Required:

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
Dec. 31-Bond
Dec. 31-Closing
Year 2
June 30
Dec. 31-Bond
Dec. 31-Closing
Year 3
June 30

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

date	explanation	debit	credit
1-Jul	cash	5847543
	discount on bonds payable	502457
	bonds payable		6350000
31-Dec	interest expense	272496
	discount on bonds payable		50246
	cash		222250
31-Dec	income summary	272496
	interest expense		272496
Year 2
1-Jul	interest expense	272496
	discount on bonds payable		50246
	cash		222250
31-Dec	interest expense	272496
	discount on bonds payable		50246
	cash		222250
31-Dec	income summary	544992
	interest expense		544992
year 3
30-Jun	interest expense	272496
	discount on bonds payable		50246
	cash		222250
30-Jun	bonds payable	6350000
	loss on redemption of bonds	174473
	discount on bonds payable		301473
	cash		6223000