National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of
ID: 2423834 • Letter: N
Question
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $750,000 on January 1, 2013. The bonds mature on December 31, 2016 (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.)
Total values are based on:
n=
i=
Cash Flow: Amount: Present Value:
Interest
Principle
Price of bonds:
Prepare the journal entry to record their issuance by National on January 1, 2013. (If no entry is required for a transaction, select "No journal entry required" in the first account field.)
Prepare an amortization schedule that determines interest at the effective rate each period.
Prepare the journal entry to record interest on June 30, 2013. (If no entry is required for a transaction, select "No journal entry required" in the first account field.)
Prepare the appropriate journal entries at maturity on December 31, 2016. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $750,000 on January 1, 2013. The bonds mature on December 31, 2016 (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.)
Explanation / Answer
1.Price of the bonds = 33,750 x 6.463 + 750,000 x 0.677 = 218,126 +507,750 = $ 725,876
2.
3. Bond Amortization Schedule:
4.
5.
Date Account Title Debit Credit $ $ January 1 2013 Cash 725,826 Discount on bonds payable 24,174 Bonds payable 750,000Related Questions
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