Year 1
July	1	Issued $76,600,000 of 20-year, 8% callable bonds dated July 1, Year 1, at a market (effective) rate of 9%, receiving cash of $69,552,279. Interest is payable semiannually on December 31 and June 30.
Oct.	1	Borrowed $220,000 by issuing a six-year, 7% installment note to Nicks Bank. The note requires annual payments of $46,155, with the first payment occurring on September 30, Year 2.
Dec.	31	Accrued $3,850 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 $176,193 is combined with the semiannual interest payment.
Year 2
June	30	Paid the semiannual interest on the bonds. The bond discount amortization of $176,193 is combined with the semiannual interest payment.
Sept.	30	Paid the annual payment on the note, which consisted of interest of $15,400 and principal of $30,755.
Dec.	31	Accrued $3,312 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 $176,193 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 $6,342,949 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 $13,247 and principal of $32,908.

Required:

1.

Journalize the entries to record the foregoing transactions. Round all amounts to the nearest dollar. Refer to the Chart of Accounts for exact wording of account titles.

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 December 31, Year 2.

CHART OF ACCOUNTS

Winklevoss 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