Question

National Orthopedics Co. issued 11% bonds, dated January 1, with a face amount of $700,000 on January 1, 2021. The bonds mature on December 31, 2024 (4 years). For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. (FV of $1. PV of $1, EVA of $1. PVA of $1, EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2021. 2. Prepare the journal entry to record their issuance by National on January 1, 2021. 3. Prepare an amortization schedule that determines interest at the effective rate each period. 4. Prepare the journal entry to record interest on June 30, 2021. 5. Prepare the appropriate journal entries at maturity on December 31, 2024. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 5 Required 3 Required Determine the price of the bonds at January 1, 2021. (Round final answers to the nearest whole dollar.) Table values are based on: n = 6.0% | = Cash Flow Amount Present Value Interest Principal Price of bonds

Answer 1

Table values are based on:
n=	8
i=	6.0%
Cash Flow	Amount	Present Value
Interest	$700,000*5.5% =$38,500	$2,39,077
Principal	$700,000	$4,39,187
Price of Bonds		$6,78,264
Amortization table
Date	Interest Payment($700,000*5.50%)	Interest expenses(Bond carrying amount*6%)	Discount amorrtization	Unamortized discount	Bond carrying amount
01-Jan-21				21,736	6,78,264
30-Jun-21	38,500	40,696	2,196	19,540	6,80,460
31-Dec-21	38,500	40,828	2,328	17,213	6,82,787
30-Jun-22	38,500	40,967	2,467	14,745	6,85,255
31-Dec-22	38,500	41,115	2,615	12,130	6,87,870
30-Jun-23	38,500	41,272	2,772	9,358	6,90,642
31-Dec-23	38,500	41,439	2,939	6,419	6,93,581
30-Jun-24	38,500	41,615	3,115	3,304	6,96,696
31-Dec-24	38,500	41,804	3,304	0	7,00,000
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	01-Jan-21	Cash	6,78,264
		Discount on Bonds Payable	21,736
		Bonds Payable		7,00,000
		(To bonds issued at discount)
	30-Jun-21	Interest Expenses	40,696
		Discounts on Bond payable		2,196
		Cash		38,500
		(Discount on Bonds amortized)
	31-Dec-24	Bonds Payable	7,00,000
		Cash		7,00,000