On January 1, 2014, De La Terre Bistro issued $700,000 of 15-year, 7% bonds payable. The bonds

Question:

On January 1, 2014, De La Terre Bistro issued $700,000 of 15-year, 7% bonds payable. The bonds were sold for $725,000. The bonds pay interest each June 30 and December 31.

Requirements

1. Fill in the blanks to complete these statements:

a. De La Terre Bistro’s bonds are priced at (express the price as a percentage)

b. When De La Terre Bistro issued its bonds, the market interest rate was (higher than, lower than, or equal to) 7%.

c. The amount of bond discount or premium is $

2. Record the following transactions, first using the straight-line method and second using the effective interest method

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 De La Terre Bistro 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...