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Xonic Corporation issued $7.5 million of 20-year, 8 percent bonds on April 1, 2018, at 102....

Xonic Corporation issued $7.5 million of 20-year, 8 percent bonds on April 1, 2018, 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, 2038. Xonic’s fiscal year ends on December 31.

1. Record the bond interest and amortize bond premium.

2. Record the final interest payment and amortize bond premium.

3. Record the retirement of the bonds.

Solutions

Expert Solution

April 1 2018 Cash (7,500,000*102%)                                            7,650,000
Bond payable                       7,500,000
Premium on Bonds payable                          150,000
(Bond issued)
Sept 30 2018 Interest expenses                                                296,250
Premium on Bonds Payable (150,000/20)/2                                                     3,750
Cash (7,500,000*8%)/2                          300,000
(Interst paid and premium amortized)
Mar 31 2038 Interest expenses (Jan-March 2038) (296,250/2)                                                148,125
Interest payable (Oct-Dec 2037) (296,250/2)                                                148,125
Premium on Bonds Payable (150,000/20)/2                                                     3,750
Cash (7,500,000*8%)/2                          300,000
(Interst paid and premium amortized)
Mar 31 2038 Bonds payable                                            7,500,000
Cash                       7,500,000
(Bond retired)

ekkarill92 answered 2 years ago
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