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The following transactions were completed by Winklevoss Inc., whose fiscal year is the calendar year: 2016 July 1 Issued $71,900,000 of 20-year, 6% callable bonds

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

2016
July 1 Issued $71,900,000 of 20-year, 6% callable bonds dated July 1, 2016, at a market (effective) rate of 7%, receiving cash of $64,222,669. Interest is payable semiannually on December 31 and June 30.
Oct. 1 Borrowed $420,000 by issuing a six-year, 5% installment note to Nicks Bank. The note requires annual payments of $82,747, with the first payment occurring on September 30, 2017.
Dec. 31 Accrued $5,250 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 $191,933 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 $191,933 is combined with the semiannual interest payment.
Sept. 30 Paid the annual payment on the note, which consisted of interest of $21,000 and principal of $61,747.
Dec. 31 Accrued $4,478 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 $191,933 is combined with the semiannual interest payment.
31 Closed the interest expense account.
2018
June 30 Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $6,909,599 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 $17,913 and principal of $64,834.

Required:

1. Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar. Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.
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.

CHART OF ACCOUNTSWinklevoss Inc.General Ledger

ASSETS
110 Cash
111 Petty Cash
121 Accounts Receivable
122 Allowance for Doubtful Accounts
126 Interest Receivable
127 Notes Receivable
131 Merchandise Inventory
141 Office Supplies
142 Store Supplies
151 Prepaid Insurance
191 Land
192 Store Equipment
193 Accumulated Depreciation-Store Equipment
194 Office Equipment
195 Accumulated Depreciation-Office Equipment
LIABILITIES
210 Accounts Payable
221 Salaries Payable
231 Sales Tax Payable
232 Interest Payable
241 Notes Payable
251 Bonds Payable
252 Discount on Bonds Payable
253 Premium on Bonds Payable
EQUITY
311 Common Stock
312 Paid-In Capital in Excess of Par-Common Stock
315 Treasury Stock
321 Preferred Stock
322 Paid-In Capital in Excess of Par-Preferred Stock
331 Paid-In Capital from Sale of Treasury Stock
340 Retained Earnings
351 Cash Dividends
352 Stock Dividends
390 Income Summary
REVENUE
410 Sales
610 Interest Revenue
611 Gain on Redemption of Bonds
EXPENSES
510 Cost of Merchandise Sold
515 Credit Card Expense
516 Cash Short and Over
521 Sales Salaries Expense
522 Office Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Repairs Expense
534 Selling Expenses
535 Rent Expense
536 Insurance Expense
537 Office Supplies Expense
538 Store Supplies Expense
541 Bad Debt Expense
561 Depreciation Expense-Store Equipment
562 Depreciation Expense-Office Equipment
590 Miscellaneous Expense
710 Interest Expense
711 Loss on Redemption of Bonds

1. Journalize the entries to record the transactions. Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

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2. Indicate the amount of the interest expense in (a) 2016 and (b) 2017.

2016:
2017:

3. Determine the carrying amount of the bonds as of December 31, 2017.

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