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 $$1,500,000$ of $4-$ year, $7\%$ bonds at a market $($effective$)$

interest rate of $6\%,$ receiving cash of $$1,552,648.$ Interest is payable semiannually on April $1$ and October $1.$

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.

b$.$ Journalize the entry to record the first interest payment on October $1,20$Y$1,$ and amortization of bond premium for six months, using the straight$-$line method. Round

to the nearest dollar. If an amount box does not require an entry, leave it blank.

Interest Expense

Premium on Bonds Payable

c$.$ Why was the company able to issue the bonds for $$1,552,648$ rather than for the face amount of $$1,500,000?$

The market rate of interest is

the contract rate of interest.