Federal Semiconductors issued 12% bonds, dated January 1, with a face amount of $940 million on January 1, 2021. The bonds sold for $873,516,024 and mature on December 31, 2040 (20 years). For bonds of similar risk and maturity the market yield was 13%. 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 $860 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 $866 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. Answer is not complete. Complete this question by entering your answers in the tabs below. Calculation General Journal 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. (Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Show less Calculation General Journal Complete the below table to determine the amounts for the journal entries. (Negative amount should be indicated by a minus sign. Round final answers to the nearest whole dollars.) Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Increase in Balance Carrying Value Fair Value Unrealized Holding Gain (loss) 01/01/2021 $ 873,516,024 873,894,566 06/30/2021 378,542 $56,400,000 $ 56,778,542 56,400,000 56,803,147 12/31/2021 403,147 874,297,713 860,000,000 $ 14,297,713 06/30/2022 56,400,000 56,829,351 429,351 874,727,064 12/31/2022 56,400,000 56,857,259 457,259 875,184,323 $ 9,184,323 866,000,000 Bonds Payable Fair Value Adjustment Net Liability(FMV) 01/01/2021 01/01/2021 06/30/2021 06/30/2021 12/31/2021 12/31/2021 873,516,024 378,542 403,147 874,297,713 429,351 457,259 875,184,323 $ 14,297,713 14,297,713 $ 860,000,000 06/30/2022 06/30/2022 12/31/2022 12/31/2022 (5,113,390) 9,184,323 $ 866,000,000 Calculation General Journal > No Date General Journal Debit Credit 1 June 30, 2021 56,778,542 Interest expense Discount on bonds payable 378,542 56,400,000 Cash 2 56,803,147 December 31, 202 Interest expense Discount on bonds payable 403,147 56,400,000 Cash 3 14,297,713 December 31, 202 Fair value adjustment Gain on bonds payable (unrealized, OCI) 14,297,713 4 June 30, 2022 56,829,351 Interest expense Discount on bonds payable Cash 429,351 56,400,000 5 56,857,259 December 31, 202 Interest expense Discount on bonds payable Cash 457,259 56,400,000 6 5,113,390 X December 31, 202 Loss on bonds payable (unrealized, NI) Fair value adjustment 5,113,390 X
