Question

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 $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 Prepare the appropriate journal entries at maturity on December 31, 2024. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round intermediate calculations and final answers to the nearest whole dollar.) View transaction list

Answer 1

Answer 1.

Face Value of Bonds = $500,000

Annual Coupon Rate = 9.00%
Semiannual Coupon Rate = 4.50%
Semiannual Coupon = 4.50% * $500,000
Semiannual Coupon = $22,500

Time to Maturity = 4 years
Semiannual Period = 8

Annual Interest Rate = 10.00%
Semiannual Interest Rate = 5.00%

Issue Price of Bonds = $22,500 * PVA of $1 (5.00%, 8) + $500,000 * PV of $1 (5.00%, 8)
Issue Price of Bonds = $22,500 * 6.4632 + $500,000 * 0.6768
Issue Price of Bonds = $483,822

Answer 3.

Date Cash Paid Jan. 01, 2021 June 30, 2021 $ Dec. 31, 2021 $ June 30, 2022 $ Dec. 31, 2022 $ June 30, 2023 $ Dec. 31, 2023 $ June 30, 2024 $ Dec. 31, 2024 $ 22,500 $ 22,500 $ 22,500 $ 22,500 $ 22,500 $ 22,500 $ 22,500 $ 22,500 $ Interest Discount Unamortized Carrying Value Expense Amortized | Discount 16,178 $ 483,822 24,191 $ 1,691 $ 14,487 $ 485,513 24,276 $ 1,776 $ 12,711 $ 487,289 24,364 $ 1,864 $ 10,847 $ 489,153 24,458 $ 1,958 $ 8,889 $ 491,111 24,556 $ 2,056 $ 6,833 $ 493,167 24,658 $ 2,158 $ 4,675$ 495,325 24,766 $ 2,266 $ 2,409 $ 497,591 24,909 $ 2,409 $ - $ 500,000 Ś

Answer 2, 4 and 5.

Credit $ $ Debit 483,822 16,178 $ 500,000 Date General Journal Jan. 01, 2021 Cash Discount on Bonds Payable Bonds Payable June 30, 2021 Interest Expense Discount on Bonds Payable Cash Dec. 31, 2014 Bonds Payable Cash 24,191 1,691 22,500 $ 500,000 $ 500,000