Federal Semiconductors issued 10% bonds, dated January 1, with a face amount of $870 million on January 1, 2013. The bonds sold for $800,199,358 and mature on December 31, 2032 (20 years). For bonds of similar risk and maturity the market yield was 11%. 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, 2013, the fair value of the bonds was $780 million as determined by their market value in the over-the-counter market.
| Complete the below table to record the following journal entries. (Enter your answers in whole dollars.) |
| Semiannual Interest Period-End | Cash Interest Paid | Bond Interest Expense | Increase in Balance | Carrying Value | Fair Value | Unrealized holding Gain (Loss) |
| 01/01/2013 |
|
|
|
$800,199,358 |
|
|
| 06/30/2013 |
|
|
|
|
|
|
| 12/31/2013 |
|
|
|
|
$780,000,000 |
|
| 06/30/2014 |
|
|
|
|
|
|
| 12/31/2014 |
|
|
|
|
$786,000,000 |
|
|
Bonds Payable |
Bonds Payable |
|
Fair Value Adjustment |
Farir Value Adjustment |
|
| 01/01/2013 |
|
800,199,358 |
01/01/2013 |
|
|
|
| 06/30/2014 |
|
|
06/30/2013 |
|
|
|
| 12/31/2013 |
|
|
12/31/2013 |
|
|
|
|
|
800,199,358 |
|
|
|
|
| 06/30/2014 |
|
|
06/30/2014 |
|
|
|
| 12/31/2014 |
|
|
12/31/2014 |
|
|
|
|
|
800,199,358 |
|
|
|
|
|
|
|
|
|
|
|
|
| 1. |
Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2013, balance sheet. (Enter your answers in whole dollars. If no entry is required for a particulartransaction, select "No journal entry required" in the first account field.)
|
|
1. Jun.30,2013 Record the interest expense
2. Dec.31,2013 Record the interest expense
3. Dec. 31,2013 Record the fair value adjustment |
| 2. |
Assume the fair value of the bonds on December 31, 2014, had risen to $786 million. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2014, balance sheet.(Enter your answers in whole dollars. If no entry is required for a particulartransaction, select "No journal entry required" in the first account field.)
|
|
1. Jun.30,2014 Record the interest expense
2. Dec.31,2014 Record the interest expense
3. Dec. 31,2014 Record the fair value adjustment |
|