Problem $14-4$ B

Straight$-$Line: Amortization of bond discount

P$2$

Gomez issues $$240,000$ of $6\%,15-$year bonds dated January $1,2021,$ that pay interest semiannually on June $30$ and December $31.$ They are issued at $$198,494$ when the market rate is $8\%.$

Required

$1.$ Prepare the January $1$ journal entry to record the bonds' issuance.

$2.$ Determine the total bond interest expense to be recognized over the life of the bonds.

$3.$ Prepare a straight$-$line amortization table like the one in Exhibit $14\mathrm{.}7$ for the bonds' first two years.

$4.$ Prepare the journal entries to record the first two interest payments.

Analysis Component

$5.$ Assume the market rate at issuance is $4\%$ instead of $8\%.$ Without providing numbers, describe how this change affects the amounts reported on Gomez's financial statements.

Check $(2)$ $$257,506(3)6/30/2022$ carrying value, $5202,646$