On July 1, 2014, Garden Works, Inc. issued $300,000 of ten-year, 7% bonds for $303,000. The bonds were dated July 1, 2014, and semi-annual interest will be paid each December 31 and June 30. Garden Works Inc. uses straight-line amortization. What is the bond liability to be reported on the December 31, 2015 balance sheet?

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The bond premium of $3,000 ($303,000 - $300,000) is amortized over 20 periods (10 years x 2). Each period, $150 ($3,000/20) is amortized. By December 31, 2015, 3 periods have passed, so $450 ($150 x 3) is amortized. The bond liability is $303,000 - $450 = $302,550.