Entries for Bonds Payable, including bond redemption

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:

Year 1

July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semiannually on December 31 and June 30.

Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined

with the semiannual interest payment.

31. Closed the interest expense account.

Year 2

June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined

with the semiannual interest payment..

Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment.

31. Closed the interest expense account.

Year 3

June 30. Recorded the redemption of the bonds, which were called at 103. The balance in the bond premium

account is $6,253,632 after payment of interest and amortization of premium have been recorded.

(Record the redemption only.)

1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.

Year 1 July1

Dec.31

Dec.31

Year 2 June 30

Dec.31

Dec.31

Year 3 June 30

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.

$