Federal Semiconductors issued 9% bonds, dated January 1, with a face amount of $760 million on January 1, 2021. The bonds sold for $694,795,472 and mature on December 31, 2040 (20 years). For bonds of similar risk and maturity the market yield was 10%. 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 $680 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 $686 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 paid interest	bond interest expense	in crease in balance	Carrying value	fair value	Fair value adjustment balance	increase(decrease) in fair value adjustment
1/01/2021				694,795,472		0
6/30/2021
12/31/2021					680,000,000
6/30/2022
12/31/2022					686,000,000