Question

National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $400,000 on January 1, 2018 The bonds mature on December 31, 2021(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. FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) points Skipped Required: 1. Determine the price of the bonds at January 1, 2018 2. Prepare the journal entry to record their issuance by National on January 1, 2018 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, 2018 5. Prepare the appropriate journal entries at maturity on December 31, 2021. eBook Print Complete this question by entering your answers in the tabs below. References Required 1 Required 2 Required 3 Required 4 Required 5 Determine the price of the bonds at January 1, 2018. (Round final answers to the nearest whole dollar) Table values are based on: Amount Present Value Cash Flow Interest Principal Price of bonds

Answer 1

Answer Page No 0 i O Price the bonds and Jan 1, 2018 Price of the bonds = present value of interest payments + Present value of principal repayment (todo x 38 ] x 16tensa) + [fes0 x indonje) 6 = (18000 X6:20979) + (400,000 X 016274) 111746 + $362740 1. Price of the bonds a $ 362740 ② Tournal entering Particulari Debit Credit I Jan 1, $362740 2018 Discount on bonds payable $ 342601 Bonds payable $400,000 Date Cash

Page. No 3 Amortization schedule Effective interest - Maket yate x Previous book value Interest payment a 405..face value = 415% x 400,000 . = $18000 Amortization of brand discount s ettective interest - interest payment Book value of the bonds = Amortization of bond discount + Previous book value Interest Dante Amortization of ebbective interest Book value es Payment bond discount I f bonds $362740 6/30118 $21964 $ 18000 $3764 $366504 12/31/18 $ 21990 $18000 $3990 $370494 16/20119 $ 22930 $ 18000 $ 4330 $374724 $22483 $ 18000 $4483 $ 379207 6/30/20 $22752. $18000 $4752 $383959 12/31/20 $ 23038 $18000 $388997 6 130/21 $23340 $ 18000 $5340 12131121 $23661 $ 18000 $5661 Jan 1 12/31/19 $ 5038 $394334 $399998

Page No ③ Credit ② Journal entry Date Particular Ton 30) he Interest expense Discount on bonds payable 2018 cash Debit $21764 $3764 $ 18000 o maturity of bonols Debit credit I Date Townal entries should be prepared on Particular Intered expense Discount on bonds payable Dec 31, $23661 2021 $ 5661 $ 18000 Cash $400,000 Bonds payable Cash $400,000