Book Show Me How Calculator Print Item The following transactions were completed
ID: 2402149 • Letter: B
Question
Book Show Me How Calculator Print Item The following transactions were completed by Winklevoss Inc, whose fiscal year is the calendar year Year 1 Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, Yar 1, at a market (efetive) rate of 13%, receiving cash of S63532267 lniorest is payable semiannually on December 31 and June 30 Borrowed $200,000 by issuing a six-year, 6% instalment note to Nicks Bank The note requies annual payments of $40,673, with the first payment occurring on September 30, Year 2 July 1 I Dec 31 Accrued $3,000 of interest on the installment note. The intorest is payable on the date of the next instalment note payment 31 Pald the semiannual interest on the bonds. The bond discount amortization of $261,693 is combined with the semiannual 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 iInterest 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 next installment note payment Paid the semiannual interest on the bonds The bond discount amortization of $261,693 is combined with the semiannual interest payment 31 Year 3 Recorded the redemption of the bonds, 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 June 30 Record the redemption only Sept 30 Paid the second annual payment on the note, which consisted of interest of $10,280 and principal of All work savedExplanation / Answer
JOURNAL ENTRIES IN THE BOOKS OF 6WINKLEVOSS INC
year 2
2)
a) interest expenditure in year 1 = $ 3000+$ 4331693 = $4334693
b)interest expenditure in year 2 = $4331693 +$12000 + $4331693 = $8675386
3)
carrying amount of bonds as on december 31, year 2 =
= $ 63532267 + ($261693 + $ 261693 + $ 261693 + $ 261693)
= $ 64579039.
date particulars l/f debit credit year 1 1 july cash a/c dr 63532267 discount on bonds payable a/c dr 10467733 to bonds payable 74000000 (being issue of bonds for cash) 1 oct cash a/c dr 200000 to notes payable long term a/c 200000 (being borrowed money from nicks bank) 31 dec interest expences a/c dr 3000 to interest payable a/c 3000 (being interest will be payable) 31 dec interest expense a/c dr 4331693 to discount on bill payable a/c 261693 to cash a/c (74000000*11%*6/12) 4070000 (being interest on bonds will be paid)