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National orthopedics company issued 8% bonds dated january 1 with a face amount of 750000 on january 1 2021 the bonds mature on devember 21 2024 for bonds of similar risk and maturity the market rield was 10% interest is paid semiannually on june 30 and december 31 deteremine the price of the bonds at january 1 2021.

Required:
a. Prepare the journal entry to record their issuance by nation on january 1 2021.
b. Prepare an amortization schedule that determines interest a the effective rate each period.
c. Determine the price of the bonds at January 1, 2021.
d. Prepare the appropriate journal entries at maturity on December 31, 2021.

Respuesta :

jepessoa

Answer:

a) January 1, 2021, bonds issued at a discount

Dr Cash 701,527.50

Dr Discount on bonds payable 48,472.50

    Cr Bonds payable 750,000

price per bond:

PV of face value = $1,000 / (1 + 5%)⁸ = $676.84

PV of coupons payments = $40 x 6.4632 (PV annuity factor, 5%, 8 periods) = $258.53

price = $935.37

b. I attached an excel spreadsheet

c. price of each bond at issuance = $935.37

d. December 31, 2024, last coupon payment

Dr Interest expense 37,140.61

    Cr Cash 30,000

    Cr Discount on bonds payable 7,140.61

December 31, 2024, bonds redeemed

Dr Bonds payable 750,000

    Cr cash 750,000

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