Onerumor Inc. issued $9,920,000 of 7 percent, 20-year bonds at a premium. The bonds are retired prior to maturity at 101. The book value of the bonds is $10,456,000 at this time. Onerumor Inc. amortizes bond premiums using the effective-interest method. Required 1. Was the contract rate on the bonds at the time of issuance greater or less than the market rate of interest? Explain. 2. Prepare the journal entry to record the retirement of the bonds. 3. Assume that the bonds were redeemed at maturity. Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Explain. Requirement 1. Was the contract rate on the bonds at the time of issuance greater or less than the market rate of interest? Explain. for the interest rate. The contract rate on the bonds is the market rate of interest at the time of issuance. This means that bond purchasers were willing to pay Requirement 2. Prepare the journal entry to record the retirement of the bonds. (Record debits first, then credits. Exclude explanations from journal entries.) Date Journal Entry Accounts Debit Credit Requirement 3. Assume that the bonds were redeemed at maturity. Would the total cash interest paid be different if the company used the straight-line method of amortization of premiums? Explain. The straight-line method of amortizing the premium would the total cash paid for interest. Interest payments are paid at the over the life of the bond. Therefore, amount of interest is paid at each interest period