On July 1, 2017, Waubonsee Ltd. issued $3.2 million of 10-year, 6% bonds at $3,449,427. This price resulted in a market interest rate of 5%. The bonds pay semi-annual interest on July 1 and January 1, and Waubonsee has a December 31 year end.

1) Assuming Waubonsee Ltd. has an October 31 year end, prepare the adjusting entry related to these bonds on October 31, 2017, as well as the subsequent interest payment on January 1, 2018.