Effect of Bond Issuance A bond with a face value of $10,000 is issued at a discount of $800 on January 1, 2010.

The face rate of interest on the bond is 7%.

Required 1. Was the market rate at the time of issuance greater than 7% or less than 7%?

2. If a balance sheet is presented on January 1, 2010, how will the bonds appear on the balance sheet?

3. If a balance sheet is presented on December 31, 2010, will the amount for the bonds be higher or lower than on January 1, 2010?

AppendixLO1