Federal Semiconductors issued 12% bonds, dated January 1, with a face amount of $840 million on January
Question:
Federal Semiconductors issued 12% bonds, dated January 1, with a face amount of $840 million on January 1, 2018. The bonds sold for $780,588,787 and mature on December 31, 2037 (20 years). For bonds of similar risk and maturity the market yield was 13%. 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, 2018, the fair value of the bonds was $760 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2019 had risen to $766 million.
Required:
Complete the below table to record the following journal entries.
1. & 2. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2019, balance sheet. Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.
- Calculation
- General Journal
Complete the below table to record the following journal entries. (Negative amount should be indicated by a minus sign. Round final answers to the nearest whole dollars.)
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- Calculation
Journal entry worksheet
- Record the interest expense.
Note: Enter debits before credits.
Date General Journal Debit Credit June 30, 2018 - Record the interest expense.
Note: Enter debits before credits.
Date General Journal Debit Credit December 31, 2018
- Record the fair value adjustment.
Note: Enter debits before credits.
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- Record the interest expense.
Note: Enter debits before credits.
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- Record the interest expense.
Note: Enter debits before credits.
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- Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.
Note: Enter debits before credits.
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Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas