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 $8,400,000 of 9-year, 10% bonds at a market (effective) interest rate of 9%, receiving cash of $8,910,721. 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 Premium on Bonds Payable Bonds Payable Feedback 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. 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 Premium on Bonds Payable Cash c. Why was the company able issue the bonds for $8,910,721 rather than for the face amount of $8,400,000? The market rate of interest is less than the contract rate of interest.