Exercise 14-30 The ye Show On January 1, 2021, Rapid Airlines issued $225,000,000 of its 8% bonds for $207,000,000. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $213,000,000 as determined by their market value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates. Prepare the necessary journal entries on the dates shown below. Debit Credit Issuance of the bonds Date Account 1/1/21 Discount on Bonds Payable Credit Interest expense effective interest method) Date Account 6/30/21 Interest Expense Discount on Bonds Payable Cash Debit 10,350,000 1,350,000 Correct 9,000,000 Credit Interest expense (effective interest method) Date Account 12/31/21 Interest Expense Discount on Bonds Payable Cash Debit 10,417,500 Correct 1,417,500 9,000,000 Adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet. Date Account Debit Credit 12/31/21 Fair Value Adjustment 0 Incorrect