Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $2,100,000 of 5-year, 12% bonds at a market (effective) interest rate of 9%, receiving cash of $2,349,250. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank. Cash 2,349,250 Premium on Bonds Payable 249,250 Bonds Payable x 2,100,000 X Feedback Check My Work b. Journalize the entry to record the first interest payment on October 1, 2016, 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.) For a compound transaction, if an amount box does not require an entry, leave it blank. Interest Expense 111,045 x Premium on Bonds Payable 14,955 X Cash 126,000 Feedback Check My Work c. Why was the company able to issue the bonds for $2,349,250 rather than for the face amount of $2,100,000? The market rate of interest is less than the contract rate of interest. Entries for Issuing and Calling Bonds; Gain Emil Corp. produces and sells wind-energy-driven engines. To finance its operations, Emil Corp. issued $889,000 of 15-year, 14% callable bonds on May 1, 20Y1, at their face amount, with interest payable on May 1 and November 1. The fiscal year of the company is the calendar year. Journalize the entries to record the following selected transactions: 20Y1 May 1 Issued the bonds for cash at their face amount. Nov. 1 Paid the interest on the bonds. 2015 Nov. 1 Called the bond issue at 95, the rate provided in the bond indenture. (Omit entry for payment of interest.) Issued the bonds for cash at their face amount. 20Y1, May 1 Cash 889,000 Bonds Payable 889,000 Paid the interest on the bonds. 20Y1, Nov. 1 Interest Expense Cash Called the bond issue at 95, the rate provided in the bond indenture. (Omit entry for payment of interest.) For a compound transaction, if an amount box does not require an entry, leave it blank. 2015, Nov. 1 Bonds Payable 889,000 Gain on Redemption of Bonds Cash