Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $880 million on January 1, 2013. The bonds sold for $813,796,294 and mature on December 31, 2032 (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, 2013, the fair value of the bonds was $800 million as determined by their market value in the over-the-counter market.

Required:

Complete the below table to record the following journal entries. (Enter your answers in whole dollars.)

Semiannual Interest Period-End	Cash Interest Paid	Bond Interest Expense	Increase in Balance	Carrying Value	Fair Value	Unrealized Holding Gain (loss)
01/01/2013				$813,796,294
06/30/2013
12/31/2013					$800,000,000
06/30/2014
12/31/2014					$806,000,000
	Bonds Payable			Fair Value Adjustment
01/01/2013		813,796,294	01/01/2013
06/30/2013			06/30/2013
12/31/2013			12/31/2013
		813,796,294		0
06/30/2014			06/30/2014
12/31/2014			12/31/2014
		813,796,294

1.

Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2013, balance sheet. (Enter your answers in whole dollars. If no entry is required for a particulartransaction, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
jun 30, 2013	Interest expense
	Discount on bonds payable
	Cash
Dec 31, 2013	interest expense
	discount on bonds payable
	cash
dec 31, 2013	fair value adjustment

2.

Assume the fair value of the bonds on December 31, 2014, had risen to $806 million. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2014, balance sheet.(Enter your answers in whole dollars. If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Date	General Journal	Debit	Credit
jun 30, 2014	interest expense
	discount on bonds payable
	cash
dec 31, 2014	interest expense
	discount on bonds payable
	cash
dec 31, 2014	unrealized holding loss
	fair value adjustment