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

2012

July 1. Issued $64,000,000 of 10-year, 12% callable bonds dated July 1, 2012, at a market (effective) rate of 14%, receiving cash of $57,219,878. Interest is payable semiannually on December 31 and June 30.

Oct. 1. Borrowed $320,000 as a five-year, 6% installment note from Ibis Bank. The note requires annual payments of $75,967, with the first payment occurring on September 30, 2013.

Dec. 31. Accrued $4,800 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 is amortized annually in a separate journal entry.

31. Recorded bond discount amortization of $339,006, which was determined using the straight-line method.

31. Closed the interest expense account.

2013

June 30. Paid the semiannual interest on the bonds.

Sept. 30. Paid the annual payment on the note, which consisted of interest of $19,200and principal of $56,767.

Dec. 31. Accrued $3,948 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 is amortized annually in a separate journal entry.

31. Recorded bond discount amortization of $678,012, which was determined using the straight-line method.

31. Closed the interest expense account.

2014

June 30. Recorded the redemption of the bonds, which were called at 98. The balance in the bond discount account is $5,424,098 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 $15,794 and principal of $60,173.

Instructions

1. Journalize the entries to record the foregoing transactions.

2. Indicate the amount of the interest expense in (a) 2012 and (b) 2013.

3. Determine the carrying amount of the bonds as of December 31, 2013.