EXERCISE $10\mathrm{.}9$ Accounting for Bonds Issued at a Premium: Issuance, Interest Payments, and Retirement $$ LO$10-5,$

Xonic Corporation issued $$8$ million of $20-$year, $8$ percent bonds on April $1,2021,$ 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 $31,2041.$ Xonic's fiscal year ends on December $31.$ Prepare the following journal entries.

a$.$ April $1,2021,$ to record the issuance of the bonds.

b$.$ September $30,2021,$ to pay interest and to amortize the bond premium.

c$.$ March $31,2041,$ 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 $31,2040,$ to recognize interest from October $1$ to December $31.$

d$.$ Briefly explain 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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