Question

National Orthopedics Co. issued 8% bonds, dated January 1, with a face amount of $600,000 on January 1, 2021. The bonds mature on December 31, 2024 (4 years). For bonds of similar risk and maturity the market yield was 10% Interest is paid semiannually on June 30 and December 31 (FV of $1. PV of $1. FVA of $1. PVA of $1. FVAD 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 3 Required 4 Required 5 Determine the price of the bonds at January 1, 2021. (Round final answers to the nearest whole dollar) Table values are based on: Cash Flow Amount Present Value

Answer 1

principal interest paid on bonds 600,000*4%= 600000 24000 For Principal use PV of $1 table at 5% for 8th year for interest use PV of ordinary annuity table at 5% for 8 years Required 1 Calculation of bonds issue price table values are based on n= 5.00% Cash flow principal interest expense price of bonds discount on issue = 600000 -561221 = 38779 Amount PV 600,000 $ 24000 $ $ 406,104 (6000,000*0.67684) 155,117 (24000*6.46321) 561,221 (please use factor table as given in your question )

Credit Required 2 Date Accoounting titles & Explanations 01-01-2018 Cash Discount on bonds payable Bonds payable $ $ Debit 561,221 38,779 $ 600,000 Required 3 interest period end cash interest discount carring amortizatioon value bond interest expense 5.00% 01-01-2021 06/30/21 12/31/21 06/30/22 12/31/22 06/30/23 12/31/23 06/30/24 12/31/24 total 24,000 $ 24,000 $ 24,000 $ 24,000 $ 24.000 $ 24,000 $ 24,000$ 24,000 $ 192,000 $ 28,061 $ 28,264 $ 28,477 $ 28,701 $ 28,936 $ 29,183$ 29,442 $ 29,714 $ 230,779 $ $ 4,061 S 4,264 $ 4,477 $ 4,701 $ 4,936 $ 5,183 $ 5,442 S 5,714 $ 38,779 561,221 565,282 569,546 574,024 578,725 583,661 588,844 594,286 600,000

Credit Debit 28,061 $ $ $ 4,061 24,000 Required 4 | Date Accoounting titles & Explanations 30-06-2021 interest expense Discount on bonds cash Required 5 Date Accoounting titles & Explanations 12/31/24 interest expense Discount on bonds cash Credit Debit 29,714 $ $ $ 5,714 24,000 $ 600,000 bonds payable cash $ 600,000 Please comment if you have any doubt Please give thumps up if you satisfied with the answer