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.

Answer 1

Price of Bond Period Amount 1-8 $ 24000 [600.000 8 $ 600,000 Po Puf @ s./ 6.463 0.677 Iss112 406200 $S61312 2. Jan 1, 2021 Cash Di Discount on Bond Payable (Bf) Du Bond Payalee ci $561,312 $38.688 $ 600 con ) 3. Amortization schedule Discount Crveying Date Interest Paid Interest Expanse Anoot vale Jal, 2021 S61,312 June 30, 2021 24000 28 0 66 4066 S65378 [561312 X 5%. [28066 [561312 (4) ? zu COD 4.066 Dec 31,2021 24000 28 269 4,269 S69647 Jun 30, 2022 24000 28, 482 4,482 574 129 De 31, 2022 24000 28 70 6 4,706 S78, 835 Jury 30,2023 24 ovo 28, 942 4,942 583,777 Dec31,2023 24 od 29, 189 s, 189 S88, 966 Jun 30, 2024 24 cv 29,448 S. 448 594 414 Dec 31, 2024 zuooo 29,586 ss 86 6000 날 June 30, 2021 Bond Interest Expense Discount an Bord layabes (Bf) cm coi $28,066 $ 4066 $240vo s 돌 $ 29,586 $ 5,586 co 4 Dec 31, 2024 O Bond Invest Expense Discount as Band pay aber (34) Casu Bond Payable Casu co $24,000 $600 ore $ 600 OOO