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Federal Semiconductors issued 10% bonds, dated January 1, with a face amount of $870 million on January 1, 2021. The bonds sold for $800,199,358 and

Federal Semiconductors issued 10% bonds, dated January 1, with a face amount of $870 million on January 1, 2021. The bonds sold for $800,199,358 and mature on December 31, 2040 (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, 2021, the fair value of the bonds was $780 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2022 had risen to $786 million. Required:

Complete the below table to record the following journal entries. 1. & 2. Prepare the journal entries to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2022, balance sheet. Federal determined that none of the change in fair value in 2021 was due to a decline in general interest rates and one-half of the increase in fair value in 2022 was due to a decline in general interest rates.

Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Increase in Balance Carrying Value Fair Value Unrealized Holding Gain (loss)
01/01/2021 $800,199,358
06/30/2021 $0 0
12/31/2021 0 0 $780,000,000
06/30/2022 0 0 0
12/31/2022 0 0 0 $786,000,000
Bonds Payable Fair Value Adjustment
01/01/2021 800,199,358 01/01/2021
06/30/2021 06/30/2021
12/31/2021 12/31/2021
800,199,358 0
06/30/2022 06/30/2022
12/31/2022 12/31/2022 0
800,199,358

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