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Xonic Corporation issued $8.4 million of 20-year, 8 percent bonds on April 1, 2024, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2044. Xonic's fiscal year ends on December 31. Prepare the following journal entries:

Xonic Corporation issued $8.4 million of 20-year, 8 percent bonds on April 1, 2024, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2044. Xonic's fiscal year ends on December 31. Prepare the following journal entries:

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 16E
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Xonic Corporation issued $8.4 million of 20-year, 8 percent bonds on April 1, 2024, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2044. Xonic's fiscal year ends on December 31. Prepare the following journal entries: Required: April 1, 2024, to record the issuance of the bonds. September 30, 2024, to pay interest and to amortize the bond premium. March 31, 2044, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2043, to recognize interest from October 1 to December 31. What is 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.)
Transcribed Image Text:Xonic Corporation issued $8.4 million of 20-year, 8 percent bonds on April 1, 2024, at 102. Interest is paid on March 31 and September 30 of each year, and all of the bonds in the issue mature on March 31, 2044. Xonic's fiscal year ends on December 31. Prepare the following journal entries: Required: April 1, 2024, to record the issuance of the bonds. September 30, 2024, to pay interest and to amortize the bond premium. March 31, 2044, to pay interest, amortize the bond premium, and retire the bonds at maturity (make two separate entries). Assume an adjusting entry was made on December 31, 2043, to recognize interest from October 1 to December 31. What is 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.)
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