Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Fayreau Corporation issued $5,900,000 of 10 -year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $6,283,735. Interest is payable semiannually on April 1 and October 1 . 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. Foodback TCheck My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. discount account. The straight-line method of amortization provides equal 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. Feedback * Check My Work 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. c. Why was the company able to issue the bonds for $6,283,735 rather than for the face amount of $5,900,000 ? The market rate of interest is the contract rate of interest