Accounting for bonds using the fair value option basedd on the current market interest rate. Restin Corporation issues $20,000,000 face value, 10 year, 8% semiannual coupon bonds on January 1, 2008. The bonds promise coupon payments on June 30 and December 31 of each year. The market initially priced the bonds to yield 7% compounded semiannually. The current market yield on these bonds was 6.8% compounded semiannually on June 30, 2008, and 6.4% on December 31, 2008. Restin Corporation computes interest expense for each six-month period using the market yield at the beginning of the period.

a. Compute the carrying value of these bonds on January 1, June 30, and December 31 of 2008 using the fair value option.

b. Compute the amount of interest expense and the amount of the unrealized gain or loss for the first six months of 2008.

c. Compute the amount of interest expense and the amount of the unrealized gain or loss for the second six months of 2008.

d. Give the journal entries for these bonds on January 1, June 30, and December 31 of 2008.