Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 37

Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and Retirement
Xonic Corporation issued $8 million of 20-year, 8 percent bonds on April 1, 2015, at 102. Interest is due on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2035. Xonic's fiscal year ends on December 31. Prepare the following journal entries:
a. April 1, 2015, to record the issuance of the bonds.
b. September 30, 2015, to pay interest and to amortize the bond premium.
c. March 31, 2035, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries).
d. Briefly explain the effect of amortizing the bond premium on (1) annual net income and (2) annual net cash flow from operating activities. (Ignore possible income tax effects.)