Reporting Bonds Using the Fair Value Option Mitchell Inc. issued 40 of its 6%,$1,000 bonds on January 1 of Year 1 for $38,934. The bonds pay cash interest semiannually each June 30 and December 31 and were issued to yield 7\%. The bonds mature in three years on December 31, and the company uses the effective interest method to amortize bond discounts or premiums. On January 1 of Year 1, Mitchell Inc. elects to account for the bonds using the fair value option. a. Record the issuance of bonds on January 1 of Year 1. b. Record the interest payment on June 30 of Year 1. c. Record the interest payment on December 31 of Year 1. d. At December 31 of Year 1, the market rate on the bonds drops to 7.5% due to a general increase in market risk. Record the adjustment of bonds payable to fair value. - Note: Round your answers to the nearest whole dollar. Cash Inventory Equipment Land Deferred Revenue Bonds Payable Discount on Bonds Payable Discount and Debt Issuance Costs Premium on Bonds Payable Fair Value Adjustment-Bonds Payable Note Payable Discount on Note Payable Premium on Note Payable Fair Value Adjustment-Note Payable Interest Payable Common Stock Paid-in Capital in Excess of Par-Common Stock Paid-in Capital-Stock Warrants Retained Earnings-Prior Period Adjustment Debt Conversion Expense Interest Expense Loss on Redemption of Bonds Gain on Redemption of Bonds Unrealized Gain or Loss-Income Unrealized Gain or Loss-OCl