On January 1, 2018, Whittington Stoves issued $820 million of its 6% bonds for $756 million. The bonds were priced to yield 8%. Interest is payable semiannually on June 30 and December 31. Whittington records interest at the effective rate and elected the option to report these bonds at their fair value. One million dollars of the increase in fair value was due to a change in the general (risk-free) rate of interest. On December 31, 2018, the fair value of the bonds was $772 million as determined by their market value on the NYSE.

Required: 1. Prepare the journal entry to record interest on June 30, 2018 (the first interest payment).

2. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).

3. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet.