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Assume that on

AprilApril

1,

20182018,

AtlanticAtlantic

Corp. issues

66

percent, 10-year bonds payable with a maturity value of

$ 1 comma 000 comma 000$1,000,000.

The bonds pay interest on

MarchMarch

3131

and

SeptemberSeptember

3030,

and

AtlanticAtlantic

amortizes any premium or discount using the straight-line method.

AtlanticAtlantic's

fiscal year end is

DecemberDecember

3131.

Read the requirements

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Requirement 1. If the market interest rate is

4.54.5

percent when

AtlanticAtlantic

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

66

percent bonds issued when the market interest rate is

4.54.5

percent will be priced at

a discount

a premium

par (maturity) value

. They are

attractive

unattractive

in this market, so investors will pay

less than maturity value

maturity value

more than maturity value

to acquire them.Requirement 2. If the market interest rate is

77

percent when

AtlanticAtlantic

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

66

percent bonds issued when the market interest rate is

77

percent will be priced at

a discount

a premium

par (maturity) value

. They are

attractive

unattractive

in this market, so investors will pay

less than maturity value

maturity value

more than maturity value

to acquire them.Requirement 3. Assume that the issue price of the bonds is

$ 1 comma 010 comma 000$1,010,000.

Journalize each of the bonds payable transactions. (Do not round any intermediary computations, but then round all amounts you input into the journal entry tables to the nearest whole dollar. Record debits first, then credits. Exclude explanations from any journal entries.)

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