Federal Semiconductors issued 10% bonds, dated January 1, with a face amount of $870 million on January 1, 2024. The bonds sold for $800,199,358 and mature on December 31, 2043 (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, 2024, 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, 2025, 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, 2024, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2025, balance sheet. Federal determined that none of the change in fair value in 2024 was due to a decline in general interest rates and one-half of the increase in fair value in 2025 was due to a decline in general interest rates.

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Calculation

General Journal

Complete the below table to determine the amounts for the journal entries.

Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answers to the nearest whole dollars.

Semiannual Interest Period-End	Cash Interest Paid	Bond Interest Expense	Increase in Balance	Carrying Value	Fair Value	Fair value adjustment balance needed	Increase (decrease) in Fair value adjustment
01/01/2024				$800,199,358		$0
06/30/2024			$0	0
12/31/2024			0	0	$780,000,000
06/30/2025	0		0	0
12/31/2025	0		0	0	$786,000,000
	Bonds Payable			Fair Value Adjustment
01/01/2024		800,199,358	01/01/2021
06/30/2024			06/30/2021
12/31/2024			12/31/2021
		800,199,358		0
06/30/2025			06/30/2022
12/31/2025			12/31/2022		0
		800,199,358

And then the necessary journal entries