Xonic Corporation issued $8,300,000 of 20-year, 8 percent bonds on April 1, 2015

Question

Xonic Corporation issued $8,300,000 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. Swanson's fiscal year ends on December 31.

Record the issuance of the bonds and entries to be passed post the issue. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Xonic Corporation issued $8,300,000 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. Swanson's fiscal year ends on December 31.

a-c.

Record the issuance of the bonds and entries to be passed post the issue. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

Note: Assuming straight line method of amortizing premium on Bonds.

Premium on issue of Bonds = 8,300,000*(102-100)/100 = $166,000

Premium to be amortize on every Interest date = 166,000/(20*2) = $4,150

Amount of Interest every period = 8,300,000 x 8% x 6/12 = $332,000

a. Entry for issuance of Bond

b. Entry for Interest paid on September 30

c. Entry for accrued interest on December 31

d. Entry for Interest paid on March 31

Date Accounts Titles and Explanation Debit Credit 1-Apr Cash 8,466,000 Bonds Payable 8,300,000 Premium on Bonds Payable    166,000

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