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 $6,600,000 of five-year, 5% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $6,325,552. Interest is payable semiannually on December 31 and June 30. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of s27,445 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 $27,445 is combined with the semiannual interest payment. Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $27,445 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 $164,668 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 "o". When required, round your answers to the nearest dollar. Date Account Debit Credit Year 1 July 1 Cash C 6,325,552 274,448 Discount on bonds payable ✓ Bonds payable ✓ 16,600,000 Dec. 31-Bond Interest expense Discount on bonds payable ✓ 27,445 → Cash Dec. 31-Closing Income summary Interest expense ✓ Year 2 June 30 Interest expense Discount on bonds payable ✓ Cash Dec. 31-Bond Interest expense 363,000 X 363,000 X Discount on bonds payable ✓ Cash ✓ 6,468,000 X

Answer 1

Date	Account	Debit	Credit
Year 1, July 1	Cash	$        6,325,552
	Discount on bonds payable	$           274,448
	Bonds payable		$          6,600,000
	(To record bond issue)
31-Dec	Interest expense	$           225,445
	Discount on bonds payable		$                27,445
	Cash (6600000*6%*6/12)		$              198,000
	(To record interest)
31-Dec	Income summary	$           225,445
	Interest expense		$              225,445
	(To Close interest)
Year 2
30-Jul	Interest expense	$           225,445
	Discount on bonds payable		$                27,445
	Cash		$              198,000
	(To record interest)
31-Dec	Interest expense	$           225,445
	Discount on bonds payable		$                27,445
	Cash		$              198,000
	(To record interest)
31-Dec	Income summary	$           450,890
	Interest expense		$              450,890
	(To record close interest)
June 30, Year 3	Bonds payable	$        6,600,000
	Loss on redemption of bonds	$             32,668
	Discount on bonds payable		$              164,668
	Cash (6600000*98/100)		$          6,468,000
	(To record redemption of bonds)

2.

Interest Expense
Year 1	$           225,445
Year 2	$           450,890

3.

Carrying Amount

$       6,407,887