Mellilo Corporation issued $5.2 million of 20-year, 9.5 percent bonds on July 1, 2021, at 98. Interest is due on June 30 and December 31 of each year, and all of the bonds in the issue mature on June 30, 2041. Mellilo's fiscal year ends on December 31. Prepare the following journal entries. a. July 1, 2021, to record the issuance of the bonds. b. December 31, 2021, to pay interest and amortize the bond discount. c. June 30, 2041, to pay interest, amortize the bond discount, and retire the bonds at maturity (make two separate entries). d. What is 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.)
Mellilo Corporation issued $5.2 million of 20-year, 9.5 percent bonds on July 1, 2021, at 98. Interest is due on June 30 and December 31 of each year, and all of the bonds in the issue mature on June 30, 2041. Mellilo's fiscal year ends on December 31. Prepare the following journal entries. a. July 1, 2021, to record the issuance of the bonds. b. December 31, 2021, to pay interest and amortize the bond discount. c. June 30, 2041, to pay interest, amortize the bond discount, and retire the bonds at maturity (make two separate entries). d. What is 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Mellilo Corporation issued $5.2 million
of 20-year, 9.5 percent bonds on July
1, 2021, at 98. Interest is due on June
30 and December 31 of each year, and
all of the bonds in the issue mature on
June 30, 2041. Mellilo's fiscal year ends
on December 31. Prepare the following
journal entries.
a. July 1, 2021, to record the issuance
of the bonds.
b. December 31, 2021, to pay interest
and amortize the bond discount.
c. June 30, 2041, to pay interest,
amortize the bond discount, and retire
the bonds at maturity (make two
separate entries).
d. What is 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.)
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