Question

National Orthopedics Co. issued 8% bonds, dated January 1, with a face amount of $750,000 on January 1, 2018. The bonds mature on December 31, 2021 (4 years). For bonds of similar risk and maturity the market yield was 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, 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.

Don't know how to add tables, nor do I have enough time. Please just use this other, similar question as a guide: https://www.chegg.com/homework-help/questions-and-answers/national-orthopedics-co-issued-8-bonds-dated-january-1-face-amount-700-000-january-1-2016--q18811466?trackid=4178add6&strackid=2de19c37&ii=4

Answer 1

	principal				750,000
	interest paid on bonds 750,000*4.%=				30000
	For Principal use PV of $1 table at 5% for 8 years
	for interest use PV of ordinary annuity table at 5% for 8 years
1)	Calculation of bonds issue price
	table values are based on
	n=	8
	i=	5.00%
	Cash flow		Amount	PV
	principal		750,000	507630		(750,000*.67684)
	interest expense		30000	193896		(30000*6.46321)
	price of bonds			701526
2)	Date	Accoounting titles & Explanations				Debit	Credit
	1/1/2018	Cash				701526
		Discount on bonds payable				48,474
		Bonds payable					750,000
3)	interest	cash	bond	discount	carring
	period	interest	interest	amortizatioon	value
	end		expense
			5.00%
	1/1/2018				701526
	06/30/18	30000	35076	5076	706603
	12/31/18	30000	35330	5330	711933
	06/30/19	30000	35597	5597	717529
	12/31/19	30000	35876	5876	723406
	06/30/20	30000	36170	6170	729576
	12/31/20	30000	36479	6479	736055
	06/30/21	30000	36803	6803	742858
	12/31/21	30000	37142	7142	750000
	total	240000	288473	48473
4)	Date	Accoounting titles & Explanations				Debit	Credit
	30/6/2018	interest expense				35076
		Discount on bonds					5076
		cash					30000
	Date	Accoounting titles & Explanations				Debit	Credit
	12/31/21	interest expense				37142
		Discount on bonds					7142
		cash					30000
	31-Dec	bonds payable				750,000
		cash					750,000