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Entries for Issuing Bonds and Amortizing Premium by Straight - Line Method Favreau Corporation wholesales repair products to equipment manufacturers. On April 1 , Year

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method
Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $2,500,000 of 8-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $2,645,654. Interest is payable semiannually on April 1 and October 1.
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a. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank.
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b. Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
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c. Why was the company able to issue the bonds for $2,645,654 rather than for the face amount of $2,500,000?
The market rate of interest is
the contract rate of interest.

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