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1. Journalize the entries to record the foregoing transactions. 2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2.
1. Journalize the entries to record the foregoing transactions.
2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2.
3. Determine the carrying amount of the bonds as of December 31, Year 2.
Year 1 July 1 Oct. 1 Issued 71,100,000 of 20-year, 12% callable bonds dated July 1. Year 1, at a market (effective) rate of 14%, receiving cash of 561,621,133. Interest is payable semiannually on December 31 and June 30. Borrowed $250,000 by issuing a six-year, 5% installment note to Nicks Bank. The note requires annual payments of S49,254, with the first payment occurring on September 30, Year 2. Accrued $3,125 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 S236,972 is combined with the semiannual interest payment. Dec 31 31 Year 2 June 30 Sept. 30 Dec 31 Paid the semiannual interest on the bonds. The bond discount amortization of S236,972 is combined with the semiannual interest payment Paid the annual payment on the note, which consisted of interest of $12,500 and principal of $36,754. Accrued S2,666 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 S236,972 is combined with the semiannual interest payment. 31 Year 3 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. Paid the second annual payment on the note, which consisted of interest of $10,662 and principal of Sept. 30 $39502Step by Step Solution
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