National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2021. The bonds mature on December 31, 2024 (4 years). For bonds of similar risk and maturity the market yield was 10%. Interest is paid semiannually on June 30 and December 31. Required: 1. Determine the price of the bonds at January 1, 2021. 2. Prepare the journal entry to record their issuance by National on January

The price of the bonds $483,841.97    

Journal entry:

Dr cash $483,841.97    

Dr discount on bonds payable $16,158.03    

Cr bonds payable $500,000.00

Explanation:

Using a financial calculator, we determine the bond price by using the following inputs:

N=8(number of semiannual coupons in 4 years=4*2=8)

PMT=22500 (semiannual coupon=face value*coupon rate*6/12= $500,000*9%*6/12=$22,500)

I/Y=5(semiannual yield=10%%*6/12=5%)

FV=500000( the face value is $600,000)

CPT PV=$483,841.97    

Bond discount=face value-bond price

Bond discount=$500,000-$483,841.97    

Bond discount=$16,158.03    

The double entries are to debit cash and discount on bonds payable with $483,841.97 and $16,158.03  respectively while bonds payable is credited with the face value of $500,000

forbearance of student loan payments. under forbearance, your loan payments are postponed (or reduced) but interest continues to accrue during the period of forbearance. if you don't pay the interest during that period, the interest may be “capitalized,” which means it is added to your principal balance.