Assume that on February 1, 2010, Atlantic, Corp., issued 9%, 10-year bonds payable with maturity value of $800,000. The bonds pay interest on January 31 and July 31, and Atlantic amortizes any premium or discount by the straight-line method. Atlantic’s fiscal year-end is October 31.

Requirements 1. If the market interest rate is 8.5% when Atlantic, 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 10% when Atlantic, 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 $832,000. Journalize the following bonds payable transactions:

a. Issuance of the bonds on February 1,2010.

b. Payment of interest and amortization of premium on July 31,2010.

c. Accrual of interest and amortization of premium on October 31, 2010.

d. Payment of interest and amortization of premium on January 31,2011.