The following transactions were completed by Winklevoss Inc, whose fiscal year is the calendar year;

Year 1

July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, Year 1, at a market (effective) rate of 13%, receiving cash of $63,532,267. Interest is payable semiannually on Dec 31 and June 30.

Oct 1. Barrowed $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 Sept 30, Year 2.

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 semiannually interest payment.

Year 2

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 nest 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.

Year 3

June 30. Recorded the redemption of the bond, 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 annually payment on the note, which consisted of interest of $10,280 and principal of $30,393.

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) Year 1 and (b) Year 2.

3.Determine the carrying amount of the bonds as of Dec 31, Year 2.