On February28, 2018, Marlin Corp. issues 6%, 10-year bonds payable with a face value of $1,500,000. The bonds pay interest on February 28 and August 31. The company amortizes bond discount using thestraight-line method.

1.If the market interest rate is 5% when Marlin Corp. issues itsbonds, will the bonds be priced atpar, at apremium, or at adiscount? Explain.

The 6% bonds issued when the market interest rate is 5% will be priced at _______. They are _______ (attractive or unattractive) in thismarket, so investors will pay ________ (less than par value, more than par value, or par value) to acquire them.

2.If the market interest rate is 7% when Marlin Corp. issues itsbonds, will the bonds be priced atpar, at apremium, or at adiscount? Explain.

The 5% bonds issued when the market interest rate is 7% will be priced at _______. They are _______ (attractive or unattractive) in thismarket, so investors will pay ________ (less than par value, more than par value, or par value) to acquire them.

3.Assume that the issue price of the bonds is 99. Journalize the following bonds payable transactions.

a.Issuance of the bonds on February28, 2018

b.Payment of interest and amortization of the bond discount on August31, 2018

c.Accrual of interest and amortization of the bond discount on December31, 2018 (fiscal year-end)

d.Payment of interest and amortization of the bond discount on February28, 2019

4.Report interest payable and bonds payable as they would appear on Marlin Corp.'s balance sheet at December31, 2018.