Swanson Corporation issued $8 million of 20-year, 8 percent bonds on April 1, 2011, at 102. Interest

Question:

Swanson Corporation issued $8 million of 20-year, 8 percent bonds on April 1, 2011, 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, 2031. Swanson’s fiscal year ends on December 31. Prepare the following journal entries:

a. April 1, 2011, to record the issuance of the bonds.

b. September 30, 2011, to pay interest and to amortize the bond premium.

c. March 31, 2031, 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 upon

(1) Annual net income and

(2) Annual net cash flow from operating activities. (Ignore possible income tax effects.)

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...