Chapter 34 Homework Entries for Bonds Payable and installment Note Transactions The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: wart By Issued $5,060,000 of five-year, 6% callable bonds dated July 1, Year 1, at a market (effective) rate of 8%, receiving cash of $4,649,592. Interest is payable semiannually on December 31 and June 30. OE. I Borrowed $240,000 by issuing a 10-year, 8% installment note to Nicks Bank. The note requires annual payments of $35,767, with the first payment occurring on September 30, Year 2. Accrued $4,800 of interest on the installment note. The interest is payable on the date of the next installment note payment. Paid the semiannual interest on the bonds. The bond discount amortization of $41,041 is combined with the semiannual interest payment. Dec 31 33 Pune 30. Paid the semiannual interest on the bonds. The bond discount amortization of $41,041 is combined with the semiannual interest payment. Sept. 20. Paid the annual payment on the note, which consisted of interest of $19,200 and principal of $16,567 Dec. 31. Accrued $4,469 of interest on the installment note. The interest is payable on the date of the next installment note payment. 1. Paid the semiannual interest on the bonds. The bond discount amortization of $41,041 is combined with the semiannual interest payment. 3 Dine 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $246,244 after payment of interest and amortizatior of discount have been recorded. Record the redemption only. sept . 30. Paid the second annual payment on the note, which consisted of interest of $17,875 and principal of $17,892. Dennrad Chapter 14 Homework Round all amounts to the nearest dollar. 1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank. Data Account De July Cash Discount on Monday Bend Payable Tout 1 Cash Notes Payable Dec 31 Interest pente Interest Payable Dec 31-bond Interest Expense Discount on Bonds Tayable June 30 Interest Expense Discount on Blonde Cash Set 30 Interest Payabile Notes Payable Cash Interest Expense Interest Payable Dec 11 bond Interest Expense Discount on Monds Payable Years June 30 Bonds Payable Loss en Redemption of Bonde Discount on Bonde Payable Cash Check My Wom Chapter 14 Homework Sept 30 Interest Expense Interest Payable Notes 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. 1. The gain or loss is the balancing amount needed to complete the entry and is the difference between the carrying amount of the bonds and the redemption price. A corporation usually redeems its bonds at a price different from that of the carrying amount of the bonds. The cash payment is the same in each year. The interest and principal repayment, however, change each year. This is because the carrying amount (book value) of the note decreases each year as principal is repaid, which decreases the interest. After the final payment, the carrying amount on the note is zero, indicating that the note has been paid in full. 2. The straight-line interest rate method of amortization provides for a constant amount of interest expense each period. 3. The carrying amount of bonds payable is the face amount of the bonds less any unamortized discount or plus any unamortized premium