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 $1,410,000 of five-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 12%, receiving cash of $1,358,112. Interest is payable semiannually on December 31 and June 30.

Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $5,189 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 $5,189 is combined with the semiannual interest payment.

Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $5,189 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 $31,132 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

Cash

Discount on bonds payable

Bonds payable

Dec. 31-Bond

Interest expense

Discount on bonds payable

Cash

Dec. 31-Closing

Income summary

Interest expense

Year 2

June 30

Interest expense

Discount on bonds payable

Cash

Dec. 31-Bond

Interest expense

Discount on bonds payable

Cash

Dec. 31-Closing

Income summary

Interest expense

Year 3

June 30

Bonds payable

Loss on redemption of bonds

Discount on bonds payable

Cash

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