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On January 1, 2016, Essence Communications issued $750,000 of its 10-year, 8% bonds for $656,533. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Essence Communications records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2016, the market interest rate for bonds of similar risk and maturity was 9%. The bonds are not traded on an active exchange.

On January 1, 2016, Essence Communications issued $750,000 of its 10-year, 8% bonds for $656,533. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Essence Communications records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2016, the market interest rate for bonds of similar risk and maturity was 9%. The bonds are not traded on an active exchange. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Using the information provided, estimate the fair value of the bonds at December 31, 2016. Present value of the bonds 2. to 4. Prepare the journal entries to record interest on June 30, 2016 (the first interest payment), interest on December 31, 2016 (the second interest payment) and adjust the bonds to their fair value for presentation in the December 31, 2016, balance sheet. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 Record the interest expense. Note: Enter debits before credits. Date General Journal Debit Credit June 30, 2016 Record entry Clear entry PV_correction_01216. rev: 02_05_2016_QC_CS-40218, 07_27_2017_QC_CS-94409 Hints Hint #1 Check my work References eBook & Resources View general journal