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Kornet Co produces and sells graphite for golf clubs. The following transactions were completed by Kornet Co whose fiscal year is the calendar year.
July 1 Issued $19,000,000 of seven year 12% callable bonds dated July 1, 2007, at an effective rate of 10% receiving cash of $20,880.780. Interest is payable semiannual on December 21 and June 30.
Dec 31 Paid the semiannual interest on bonds.
Recorded bond premium amortization of $134,341, which was determined by using the straight-line method.
Dec 31 Closed the interest expense account.
June 30 Paid the semiannual interest on the bonds.
Dec 31 Paid the semiannual interest on the bonds.
Dec 31 Recorded bond premium amortization of $268,682 which was determined by using the straight-line method.
July 1 Recorded the redemption of the bonds, which were called at 101.5. The balance in the bond premium is $1,343,416 after payment.
1. Journalize the entries to record the foregoing transaction.
2. Indicate the amount of the interest expense in (a) 2007 and (b) 2008.
3. Determine the carrying amount of the bonds as of December 31, 2008.