The following transactions were completed by Hobson Inc., whose fiscal year is the calendar year: 2010 July 1. Issued $18,000,000 of five-year, 10% callable bonds dated July 1, 2010, at an effective rate of 12%, receiving cash of $16,675,184. Interest is payable semiannually on December 31 and June 30. Oct. 1. Borrowed $400,000 as a 10-year, 7% installment note from Marble Bank. The note requires annual payments of $56,951, with the first payment occurring on September 30, 2011. Dec. 31. Accrued $7,000 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. 31. Recorded bond discount amortization of $132,482, which was determined using the straight-line method. 31. Closed the interest expense account. 2011 June 30. Paid the semiannual interest on the bonds. Sept. 30. Paid the annual payment on the note, which consisted of interest of $28,000 and principal of $28,951. Dec. 31. Accrued $6,493 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. 31. Recorded bond discount amortization of $264,964, which was determined using the straight-line method. 31. Closed the interest expense account. 2012 June 30. Recorded the redemption of the bonds, which were called at 97. The balance in the bond discount account is $794,888 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 $25,973 and principal of $30,978. Instructions 1. Journalize the entries to record the foregoing transactions. 2. Indicate the amount of the interest expense in (a) 2010 and (b) 2011. 3. Determine the carrying amount of the bonds as of December 31, 2011