On February 28, 2012, 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. Dolphin Corp. amortizes bonds by the straight-line method.

Requirements
1. If the market interest rate is 5% when Dolphin 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 Dolphin 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 96. Journalize the following bonds payable transactions.
a. Issuance of the bonds on February 28, 2012
b. Payment of interest and amortization of the bonds on August 31, 2012
c. Accrual of interest and amortization of the bonds on December 31, 2012, the year end.
d. Payment of interest and amortization of the bonds on February 28, 2013
4. Report interest payable and bonds payable as they would appear on the Dolphin Corp. balance sheet at December 31, 2012.