Question

4 Assignment i National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 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 Si and PVAD of SD (Use appropriate factor(s) from the tables provided.) Required: 1. Determine the price of the bonds at January 1, 2025 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: Amount Present Value Cash Flow Interest Principal Price of bonds Required 2 >

Answer 1

							5%
						1	0.952381
	Required -1					2	0.907029
	Table values are based on:					3	0.863838
	n =	8				4	0.822702
	i =	5%				5	0.783526
						6	0.746215
	Cashflow	Amount	Present value			7	0.710681
	Interest	$22,500	$145,422	(6.46321275942626*22,500)		8	0.676839
	Principal	$500,000	$338,420	(0.676839362028687*500000)			6.463213
	Price of bonds		$483,842
	Required -2
	Account titles and explanation	Debit	Credit
01-Jan-21	Bank	$483,842
	Discount on issue bonds	$16,158
	Bonds payable		$500,000
	Required -3
		Date	Cashflow	Interest	Principal
		01-Jan-21			$483,842
		30-Jun-21	$22,500	$24,192	$485,534
		31-Dec-21	$22,500	$24,277	$487,311
		30-Jun-22	$22,500	$24,366	$489,176
		31-Dec-22	$22,500	$24,459	$491,135
		30-Jun-23	$22,500	$24,557	$493,192
		31-Dec-23	$22,500	$24,660	$495,351
		30-Jun-24	$22,500	$24,768	$497,619
		31-Dec-24	$22,500	$24,881	$500,000
	Required -4
		Debit	Credit
30-Jun-21	Interest expense	$24,192
	Cash		$22,500
	Discount on bonds payable		$1,692
31-Dec-24	Interest expense	$24,881
	Cash		$22,500
	Discount on bonds payable		$2,381

* Note: I did not had table values, hence i used excel functions to calculate the same. So there might be rounding off error. If you face this problem just give me table values for Present value Interest factor 5% for 8th period and present value annuity factor for 8 periods in the comment section I'll edit the solution.

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