Entries for Bonds Payable and Installment Note Transactions The following transactions were completed by Montague Inc., whose fiscal year is the calendar year: Year 1 Issued $1,770,000 of five-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 11%, receiving cash of July 1 $1,636,585. Interest is payable semiannually on December 31 and June 30. Borrowed $290,000 by issuing a 10-year, 7% installment note to Intexicon Bank. The note requires annual payments of $41,289, with Oct. 1. the first payment occurring on September 30, Year 2. Dec. 31. Accrued $5,075 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 band discount amortization of $13,342 is combined with the semiannual interest payment. Dec. 31. Year 2 June 30 Paid the semiannual interest on the bonds. The bond discount amortization of $13,342 is combined with the semiannual interest payment. Sept. 30. Paid the annual payment on the note, which consisted of interest of $20,300 and principal of $20,989. Dec. 31. Accrued $4,708 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 $13,342 is combined with the semiannual interest Dec. 31. payment. Year 3 June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $80,049 after payment of Interest and amortization of discount have been recorded. (Record the redemption only.) Sept. 30. Pald the second annual payment on the note, which consisted of interest of $18,831 and principal of $22,458. Required: luo Ene/May 2019 eBook Show Me How Calculator 1. Journalize the entries to record the foregoing transactions. For compound transactions, if an amount box does not require an entry, leave it blank or Date Account Debit Credit Year 1 July 1 Oct. 1 Dec. 31-Note Dec. 31-Bond NII III I Year 2 June 30 Sept. 30 Dec. 31-Note Dec. 31-Bond |Year 3 June 30 UN IIII III Sept. 30 2. Indicate the amount of the interest expense in (a) Year 1 and (b) Year 2. a. Year 1 S b. Year 2 3. Determine the carrying amount of the bonds as of December 31, Year 2