On January 1, 2014, Cave Creek Golf Club issued $600,000 of 20-year, 9% bonds payable. The bonds

Question:

On January 1, 2014, Cave Creek Golf Club issued $600,000 of 20-year, 9% bonds payable. The bonds were sold for $600,000. The bonds pay interest each June 30 and December 31 and any discount or premium is amortized using effective interest amortization.

Requirements

1. Fill in the blanks to complete these statements:

a. Cave Creek Golf Club’s bonds are priced at (express the price as a percentage)

b. When Cave Creek Golf Club issued its bonds, the market interest rate was (higher than, lower than, or equal to) 9%.

c. The amount of bond discount or premium is $

2. Record the following transactions:

a. Issuance of the bonds payable on January 1, 2014.

b. Payment of interest (and amortization of discount or premium, if any) on June 30, 2014.

c. Payment of interest (and amortization of discount or premium, if any) on December 31, 2014. Explanations are not required.

3. At what amount will Cave Creek Golf Club report the bonds on its balance sheet at December 31, 2014?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...