Problem 14.6.a

National Orthopedics Co. issued 8% bonds, dated January 1, with a face amount of $600,000 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 PVD 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.

Determine the price of the bonds at January 1, 2018. (Round final answers to the nearest whole dollar.)

Tables are based on:

n = ______________

I = ______________

Cash Flow Amount Present Value

Interest ______________ ________________

Principal ________________ _________________

Price of bonds _________________

Prepare the journal entry to record their issuance by National on January 1, 2018.

Record the issuance of the bonds on January 1, 2018.

Date General Journal Debit Credit

January 01, 2018