PR 14-4A

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

Year 1
July 1. Issued $74,000,000 of 20-year, 11% callable bonds dated July 1, Year
1, at a market (effective) rate of 13%, receiving cash of $63,532,267.
Interest is payable semiannually on December 31 and June 30.

Oct. 1. Borrowed $200,000 by issuing a six-year, 6% installment note to Nicks

Bank. The note requires annual payments of $40,673, with the first
payment occurring on September 30, Year 2.

Dec. 31. Accrued $3,000 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 $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 interest 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.

31. Paid the semiannual interest on the bonds. The bond discount
amortization of $261,693 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 $9,420,961 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 $10,280 and principal of $30,393.
Instructions
1. Journalize the entries to record the foregoing transactions. Round all amounts
to the nearest dollar.
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.