Federal Semiconductors issued 10% bonds, dated January 1, with a face amount of $820 million on January 1, 2016. The bonds sold for $754,210,889 and mature on December 31, 2032 (20 years). For bonds of similar risk and maturity the market yield was 11%. 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, 2016, the fair value of the bonds was $740 million as determined by their market value in the over-the-counter market.

1.

Record the interest expense.

2.

Record the interest expense.

3.

Record the fair value adjustment.

4.

Record the interest expense.

5.

Record the interest expense.

6.

Record the fair value adjustment.

Semiannual Interest Period-End	Cash Interest Paid	Bond Interest Expense	Increase in Balance	Carrying Value	Fair Value	Unrealized Holding Gain (loss)
01/01/2016				$754,210,889
06/30/2016			$0	0
12/31/2016			0	0	$740,000,000
06/30/2017	0		0	0
12/31/2017	0		0	0	$746,000,000
	Bonds Payable			Fair Value Adjustment
01/01/2016		754,210,889	01/01/2016
06/30/2016			06/30/2016
12/31/2016			12/31/2016
		754,210,889		0
06/30/2017			06/30/2017
12/31/2017			12/31/2017
		754,210,889		0