Presented below is the partial bond discount amortization schedule for Gomez Corp. Gomez uses the effective-interest method of amortization.

a. Prepare the journal entry to record the payment of interest and the discount amortization at the end of period 1.
b. Explain why interest expense is greater than interest paid.
c. Explain why interest expense will increase each period.

Interest Periods Issue date 1 2 Interest to Be Paid $45,000 45,000 Interest Expense to Be Recorded $48,070 48,223 Discount Amortization $3,070 3,223 Unamortized Discount $38,609 35,539 32,316 Bond Carrying Value $961,391 964,461 967,684