MC issued $5million of 20-year, 9.5 percent bonds on July 1, 2018, at 98. Interest is due on June 30 and December 31 of each year, and all the bonds in the issue mature on June 30, 2018. MC’s fiscal year ends on December 31. Prepare the following journal entries. -July 1, 2018 to record the issuance of the bonds -December 1, 2018, to pay interest and amortize the bond discount. -June 30, 2018, to pay interest, amortize bonds discount and retire the bonds at maturity (make two separate entries). -Briefly could explain the effect of amortizing the bond discount upon (1) annual net income and (2) annual net cash flow from operating activities. (Ignore possible income tax effects).

MC issued $5million of 20-year, 9.5 percent bonds on July 1, 2018, at 98. Interest is due on June 30 and December 31 of each year, and all the bonds in the issue mature on June 30, 2018. MC’s fiscal year ends on December 31. Prepare the following journal entries. -July 1, 2018 to record the issuance of the bonds -December 1, 2018, to pay interest and amortize the bond discount. -June 30, 2018, to pay interest, amortize bonds discount and retire the bonds at maturity (make two separate entries). -Briefly could explain the effect of amortizing the bond discount upon (1) annual net income and (2) annual net cash flow from operating activities. (Ignore possible income tax effects).

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PB: Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...

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