Federal Semiconductors issued 12 bonds, dated January 1, with a face amount of $840 million on January 1, 2018 The bonds sold for $780,588,787 and mature on December 31, 2037 (20 years) For bonds of similar risk and maturity the market yield was 13 Interest is paid semiannually on June 30 and December 31 Federal determines interest at the effective rate Federal elected the option to report these bonds at their fair value On December 31, 2018, the fair value of the bonds was $760 million as determined by their market value in the over the counter market Assume the fair value of the bonds on December 31, 2019 had risen to $766 million Required Complete the below table to record the following journal entries 1 2 Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2019, balance sheet Federal determined that one half of the increase in fair value was due to a decline in general interest rates Calculation General Journal Complete the below table to record the following journal entries (Negative amount should be indicated by a minus sign Round final answers to the nearest whole dollars ) Semiannual Interest Period End Cash Interest Paid Bond Interest Expense Increase in Balance Carrying Value Fair Value Unrealized Holding Gain (loss) 01 01 2018 $780,588,787 06 30 2018 $50,400,000 $50,738,271 $338,271 780,927,058 12 31 2018 50,400,000 50,760,259 360,259 781,287,317 $760,000,000 $21,287,317 06 30 2019 50,400,000 0 0 12 31 2019 0 0 0 $766,000,000 Bonds Payable Fair Value Adjustment Net Liability(FMV) 01 01 2018 780,588,787 01 01 2018 06 30 2018 338,271 06 30 2018 12 31 2018 360,259 12 31 2018 $21,287,317 781,287,317 21,287,317 $760,000,000 06 30 2019 06 30 2019 12 31 2019 12 31 2019 (21,287,317) 781,287,317 Calculation Journal entry worksheet Record the interest expense Note Enter debits before credits Date General Journal Debit Credit June 30, 2018 Record the interest expense Note Enter debits before credits Date General Journal Debit Credit December 31, 2018 Record the fair value adjustment Note Enter debits before credits Date General Journal Debit Credit December 31, 2018 Record the interest expense Note Enter debits before credits Date General Journal Debit Credit June 30, 2019 Record the interest expense Note Enter debits before credits Date General Journal Debit Credit December 31, 2019 Federal determined that one half of the increase in fair value was due to a decline in general interest rates Note Enter debits before credits Date General Journal Debit Credit December 31, 2019

Federal Semiconductors issued 12% bonds, dated January 1, with a face amount of $840 million on January 1, 2018. The bonds sold for $780,588,787 and

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Federal Semiconductors issued 12% bonds, dated January 1, with a face amount of $840 million on January 1, 2018. The bonds sold for $780,588,787 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 13%. Interest is paid semiannually on June 30 and December 31. Federal determines interest at the effective rate. Federal elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $760 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2019 had risen to $766 million.

Required:

Complete the below table to record the following journal entries.
1. & 2. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2019, balance sheet. Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.

Calculation
General Journal

Complete the below table to record the following journal entries. (Negative amount should be indicated by a minus sign. Round final answers to the nearest whole dollars.)

Semiannual Interest Period-End	Cash Interest Paid	Bond Interest Expense	Increase in Balance	Carrying Value	Fair Value	Unrealized Holding Gain (loss)
01/01/2018				$780,588,787
06/30/2018	$50,400,000	$50,738,271	$338,271	780,927,058
12/31/2018	50,400,000	50,760,259	360,259	781,287,317	$760,000,000	$21,287,317
06/30/2019	50,400,000		0	0
12/31/2019	0		0	0	$766,000,000

	Bonds Payable			Fair Value Adjustment		Net Liability(FMV)
01/01/2018		780,588,787	01/01/2018
06/30/2018		338,271	06/30/2018
12/31/2018		360,259	12/31/2018	$21,287,317
		781,287,317		21,287,317		$760,000,000
06/30/2019			06/30/2019
12/31/2019			12/31/2019		(21,287,317)
		781,287,317

Calculation
Journal entry worksheet
Record the interest expense.
Note: Enter debits before credits.
Date General Journal Debit Credit
June 30, 2018
Record the interest expense.
Note: Enter debits before credits.
Date General Journal Debit Credit
December 31, 2018