On February$28,,$ Inc. issues $\%,-$year bonds with a face value of $.$ The bonds pay interest on February $28$ and August $31.$ amortizes bonds by the$$ straight$-$line method.

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Part $1$

Requirement $1.$ If the market interest rate is

$\%$ when issues its$$ bonds, will the bonds be priced at face$$ value, a$$ premium, or a$$ discount? Explain.$$

The $\%$ bonds issued when the market interest rate is

$\%$ will be priced at$$

$$

a discount.

a premium.

par $($face$)$ value.

They are

$$

attractive

unattractive

in this$$ market, so investors will pay

$$

above face value

below face value

face value

to acquire them.

Part $2$

Requirement $2.$ If the market interest rate is $\%$ when issues its$$ bonds, will the bonds be priced at face$$ value, a$$ premium, or a$$ discount? Explain.

The $\%$ bonds issued when the market interest rate is $\%$ will be priced at$$

$$

a discount.

a premium.

par $($face$)$ value.

They are

$$

attractive

unattractive

in this$$ market, so investors will pay

$$

above face value

below face value

face value

to acquire them.

Part $3$

Requirement $3.$ Assume that the issue price of the bonds is $.$ Journalize the following bond transactions. $($Record debits$$ first, then credits. Explanations are not$$ required.$)$

a$.$ Issuance of the bonds on February$28,.$

Journal Entry

Date

Accounts

Debit

Credit

Feb.

$28$

Part $4$

b$.$ Payment of interest and amortization of the bonds on August$31,.$

Journal Entry

Date

Accounts

Debit

Credit

Aug.

$31$

Part $5$

c$.$ Accrual of interest and amortization of the bonds on December$31,.($Hold all decimals for interim calculations. Round your final answer to the nearest$$ dollar.$)$

Journal Entry

Date

Accounts

Debit

Credit

Dec.

$31$

Part $6$

d$.$ Payment of interest and amortization of the bonds on February$28,.($Hold all decimals for interim calculations. Round your final answer to the nearest$$ dollar.$)$

Journal Entry

Date

Accounts

Debit

Credit

Feb.

$28$

Part $7$

Requirement $4.$ Report interest payable and bonds payable as they would appear on the balance sheet at $($Hold all decimals for interim calculations. Round your final answer to the nearest$$ dollar.$)$

$$

LiabilitiesOn February $28,2020,$ KTrade Inc. issues $11\%,25-$year bonds with a face value of $$250,000.$ The bonds pay interest on February $28$ and August $31.$ KTrade amortizes bonds by the straight$-$line method.

Requirement $1.$ If the market interest rate is $8\frac{5}{8}\%$ when KTrade issues its bonds, will the bonds be priced at face value, a premium, or a discount? Explain.

The $11\%$ bonds issued when the market interest rate is $8\frac{5}{8}\%$ will be priced at

They are

in this market, so investors will pay

to acquire them.

Requirement $2.$ If the market interest rate is $14\%$ when KTrade issues its bonds, will the bonds be priced at face value, a premium, or a discount? Explain.

The $11\%$ bonds issued when the market interest rate is $14\%$ will be priced at

They are

Jin this market, so investors will pay

to acquire them.

Requirement $3.$ Assume that the issue price of the bonds is $95.$ Journalize the following bond transactions. $($Record debits first, then credits. Explanations are not required.$)$

a$.$ Issuance of the bonds on February $28,2020.$

b$.$ Payment of interest and amortization of the bonds on August $31,2020.$

Required

If the market interest rate is $8\frac{5}{8}\%$ when KTrade issues its bonds, will the bonds be priced at

face value, a premium, or a discount? Explain.

If the market interest rate is $14\%$ when KTrade issues its bonds, will the bonds be priced at

face value, a premium, or a discount? Explain.

Assume that the issue price of the bonds is $95.$ Journalize the following bond transactions:

a$.$ Issuance of the bonds on February $28,2020.$

b$.$ Payment of interest and amortization of the bonds on August $31,2020$

c$.$ Aocrual of interest and amortization of the bonds on December $31,2020$

d$.$ Payment of interest and amortization of the bonds on February $28,2021.$

Report interest payable and bonds payable as they would appear on the KTrade balance sheet at

December $31,2020.$

c$.$ Accrual of interest and amortization of the bonds on December $31,2020.($Hold all decimals for interim calculations. Round your final answer to the nearest dollar.$)$

d$.$ Payment of interest and amortization of the bonds on February $28,2021.($Hold all decimals for interim calculations. Round your final answer to the nearest dollar.$)$