Question
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $880 million on January 1, 2018. The bonds sold for $813,796,294 and
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $880 million on January 1, 2018. The bonds sold for $813,796,294 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 12%. 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 $800 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 $806 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.
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $880 million on January 1, 2018. The bonds sold for $813,796,294 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 12%. 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 $800 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 $806 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. General Journal Calculation 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 Period-End Unrealized Holding Gain loss Cash Interest Paid Bond Interest Expense Increase in Balance Interest Carrying Value Fair Value $ 813,796,294 01/01/2018 06/30/2018 12/31/2018 06/30/2019 12/31/2019 S 800,000,000 S 806,000,000 Bonds Payable Fair Value Adjustment 01/01/2018 06/30/2018 12/31/2018 813,796,294 01/01/2018 06/30/2018 12/31/2018 06/30/2019 06/30/2019 12/31/2019 12/31/2019 Calculation General Journal> General Journal Calculation 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. (Enter your answers in whole dollars. If no entry is required for a transactlon/event, select "No journal entry requlred" In the first account fleld.) show less Vlew transactlon IIst Import a new list Record the interest expense. Record the Interest expense. Record the fair value adjustment. Record the interest expense. Record the interest expense. Federal determined that one-half of the increase in fair 1 2 3 4 5 Credit 6 value was due to a decline in general interest ratesStep by Step Solution
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