Question

In: Accounting

On February? 28, 2016?, Dolphin Corp. issues 6?%, 10?-year bonds payable with a face value of...

On February? 28,

2016?,

Dolphin

Corp. issues

6?%,

10?-year

bonds payable with a face value of

=$900,000.

The bonds pay interest on February 28 and August 31.

DolphinDolphin

Corp. amortizes bond discount by the? straight-line method.

1.

If the market interest rate is

5?%

when

DolphinDolphin

Corp. issues its? bonds, will the bonds be priced at?par, at a? premium, or at a? discount? Explain.

2.

If the market interest rate is

7?%

when

DolphinDolphin

Corp. issues its? bonds, will the bonds be priced at?par, at a? premium, or at a? discount? Explain.

3.

Assume that the issue price of the bonds is

93.

Journalize the following bonds payable transactions.

a.

Issuance of the bonds on February? 28,

2016.

b.

Payment of interest and amortization of the bond discount on August? 31,

2016.

c.

Accrual of interest and amortization of the bond discount on December? 31,

2016?,

the? year-end.

d.

Payment of interest and amortization of the bond discount on February? 28,

2017.

4.

Report interest payable and bonds payable as they would appear on the

Dolphin

Corp. balance sheet at December? 31,2016.

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