Analyzing bond terms and accounting for bonds (Learning Objective 5)

20–25 min.

On January 1, 2014, The Meadows Golf Course issued $450,000 of 15-year, 6%

bonds payable. The bonds were sold for $477,000. The bonds pay interest each June 30 and December 31, and any discount or premium is amortized using straight-line amortization.

Requirements 1. Fill in the blanks to complete these statements:

a. The Meadows Golf Course’s bonds are priced at (express the price as a percentage)

____________.

b. When The Meadows Golf Course issued its bonds, the market interest rate was

(higher than, lower than, or equal to) ____________ 6%.

c. The amount of bond discount or premium is $ ____________.

2. Record the following transactions:

a. Issuance of the bonds payable on January 1, 2014. Explanations are not required.

b. Payment of interest (and amortization of discount or premium if any) on June 30, 2014. Explanations are not required.

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 The Meadows Golf Course report the bonds on its balance sheet at December 31, 2014?

AppendixLO1