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The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: Year 1 July 1 Issued $39,500,000 of 20-year, 7% callable
The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year:
Year 1 | ||
July | 1 | Issued $39,500,000 of 20-year, 7% callable bonds dated July 1, Year 1, at a market (effective) rate of 8%, receiving cash of $35,590,960. Interest is payable semiannually on December 31 and June 30. |
Oct. | 1 | Borrowed $200,000 by issuing a six-year, 4% installment note to Nicks Bank. The note requires annual payments of $38,152, with the first payment occurring on September 30, Year 2. |
Dec. | 31 | Accrued $2,000 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 $97,726 is combined with the semiannual interest payment. | |
Year 2 | ||
June | 30 | Paid the semiannual interest on the bonds. The bond discount amortization of $97,726 is combined with the semiannual interest payment. |
Sept. | 30 | Paid the annual payment on the note, which consisted of interest of $8,000 and principal of $30,152. |
Dec. | 31 | Accrued $1,698 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 $97,726 is combined with the semiannual interest payment. | |
Year 3 | ||
June | 30 | Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $3,518,136 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 $6,794 and principal of $31,358. |
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