July 1. Issued $1,460,000 of five-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 10%, receiving cash of $1,403,631. Interest is payable semiannually on December 31 and June 30.. Oct. 1. Borrowed $120,000 by Issuing a 10-year, 7% installment note to Nicks Bank. The note requires annual payments of $17,085, with the first payment occurring on September 30, Year 2. Dec. 31. Accrued $2,100 of interest on the installment note. The interest is payable on the date of the next installment note payment. Year 2 31. Paid the semiannual interest on the bonds. The bond discount amortization of $5,637 is combined with the semiannual interest payment. June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $5,637 is combined with the semiannual interest payment. Sept. 30. Paid the annual payment on the note, which consisted of interest of $8.400 and principal of $8,685. Dec. 31. Accrued $1,948 of interest on the installment note. The interest is payable on the date of the next installiment note payment. Year 3 31. Paid the semiannual interest on the bonds. The bond discount amortization of $5,637 is combined with the semiannual interest payment. June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $33,821 after payment of interest and amortization of discount have been recorded. Record the redemption only Sept. 30. Paid the second annual payment on the note, which consisted of interest of $7,792 and principal of $9,293, 1. Journalize the entries to record the foregoing transactions. If an amount box does not require an entry, leave it blank. Date Account Debit Year 1 July 1 Oct. I Dec. 31-Note Dec. 31-Bond Cash. Discount on Bonds Payable Bonds Payable 1,403,631 Credit 001 11 11 111 Year 2 June 30 Sept. 30 Dec. 31-Note Dec. 31-Bond LL 100 1000 10 000 001 11 1001 101 Year 3 June 30 Sept 30 1100 1000 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 anseunt of the bonds as of December 31, Year 2