Entries for issuing bonds and amortizing premium by straight$-$line method

Smiley Corporation wholesales repair products to equipment manufacturers. On April $1,20$Y$1,$ Smiley issued $$7,800,000$ of $6-$year, $7\%$ bonds at a market $($effective$)$ interest rate of $4\%,$ receiving cash of $$9,037,316.$ 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 $1,20$Y$1.$ If an amount box does not require an entry, leave it blank.

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Bonds PayableCashDiscount on Bonds PayableInterest PayablePremium on Bonds PayableCash

Accounts PayableCashDiscount on Bonds PayableInterest PayablePremium on Bonds PayablePremium on Bonds Payable

Accounts PayableBonds PayableCashDiscount on Bonds PayableInterest PayableBonds Payable

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Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.

The straight$-$line method of amortization provides equal amounts of amortization over the life of the bond.

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b$.$Journalize the entry to record the first interest payment on October $1,20$Y$1,$ and amortization of bond premium for $6$ months, using the straight$-$line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

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