Exercise $14-31($Algo$)$ Reporting bonds at fair value; calculate fair value $[$LO$14-6]$

On January $1,2021,$ Essence Communications issued $$890,000$ of its $10-$year, $8\%$ bonds for $$779,086.$ 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 $31,2021,$ the market interest rate for bonds of similar risk and maturity was $9\%.$ The bonds are not traded on an active exchange. The decrease in the market interest rate was due to a $1\%$ decrease in general $($risk$-$free$)$ interest rates. $($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 $31,2021.$

$2.$ to $4.$ Prepare the journal entries to record interest on June $30,2021($the first interest payment$),$ on December $31,2021($the second interest payment$)$ and to adjust the bonds to their fair value for presentation in the December $31,2021,$ balance sheet.