Answer:
1) the price of each bond:
PV of face value = $1,000 / 1.05⁸ = $676.84
PV of coupon payments = $40 x 6.4632 (PV annuity factor, 5%, 8 periods) = $258.53
market price per coupon = $935.37
2) journal entry to record issuance of the bonds:
January 1, 2021, bonds issued at a discount
Dr Cash 514,453.50
Dr Discount on bonds payable 35,546.50
Cr Bonds payable 550,000
3) I used an excel spreadsheet
4) June 30, 2021, first coupon payment
Dr Interest expense 25,722.68
Cr Cash 22,000
Cr Discount on bonds payable 3,722.68
5) December 31, 2024, last coupon payment
Dr Interest expense 27,236.45
Cr Cash 22,000
Cr Discount on bonds payable 5,236.45
December 31, 2024, bonds are redeemed
Dr Bonds payable 550,000
Cr Cash 550,000
