Reporting Bonds Using the Fair Value Option

Mitchell Inc. issued $76$ of its $6\%,$$$1,000$ bonds on January $1$ of Year $1$ for $$73,975.$ 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 increases to $7\mathrm{.}5\%$ 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.