PR 14-4A Entries for bonds payable and installment note transactions The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 2016 July 1. Issued $74,000,000 of 20 -year, 11% callable bonds dated July 1,2016 , at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on December 31 and June 30 . Oct. 1. Borrowed $200,000 by issuing a six-year, 6% installment note to Nicks Bank. The note requires annual payments of $40,673, with the first payment occurring on September 30, 2017. Dec. 31 . Accrued $3,000 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. 2017 June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. Sept. 30. Paid the annual payment on the note, which consisted of interest of $12,000 and principal of $28,673. Dec. 31. Accrued $2,570 of interest on the installment note. The interest is payable on the date of the next installment note payment. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual interest payment. 31. Closed the interest expense account. June 30 . Recorded the redemption of the bonds, which were called at 98 . The balance in the bond discount account is $9,420,961 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 $10,280 and principal of $30,393. Instructions 1. Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar. 2. Indicate the amount of the interest expense in (a) 2016 and (b) 2017. 3. Determine the carrying amount of the bonds as of December 31, 2017. PR 14-3A Bond premium, entries for bonds payable transactions O'Halloran, Inc. produces and sells outdoor equipment. On July 1 , Year 1 , 0 Halloran, Inc. issued $32,000,000 of 6 -year, 8% bonds at a market (effective) interest rate of 7%, receiving cash of $33,546,022. Interest on the bonds is payable semiannually on December 31 and June 30 . The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bond on July 1 , Year 1. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, Year 1 , and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. b. The second semiannual interest payment on June 30 , Year 2, and the amortization of the bond premium, using the straight-line method. Round to the nearest dollar. 3. Determine the total interest expense for Year 1
