Question

Federal Semiconductors issued 9% bonds, dated January 1, with a face amount of $910 million on January 1, 2021. The bonds sold for $831,926,157 and mature on December 31, 2040 (20 years). For bonds of similar risk and maturity the market yield was 10%. 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, 2021, the fair value of the bonds was $820 million as determined by their market value in the over-the-counter market. Assume the fair value of the bonds on December 31, 2022 had risen to $826 million.

Required:

Complete the below table to record the following journal entries.
1. & 2. Prepare the journal entries to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet, and adjust the bonds to their fair value for presentation in the December 31, 2022, balance sheet. Federal determined that none of the change in fair value in 2021 was due to a decline in general interest rates and one-half of the increase in fair value in 2022 was due to a decline in general interest rates.
  

Calculation General Journal Complete the below table to determine the amounts for the journal entries. (Negative amount should be indicated by a minus sign. Round final answers to the nearest whole dollars.) Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Increase in Balance Carrying Value Fair Value Unrealized Holding Gain (loss) 01/01/2021 06/30/2021 12/31/2021 820,000,000 $ 831,926,157 832,572,465 833,251,088 833,963,642 834,711,824 $40,950,000 40,950,000 40,950,000 40,950,000 3,251,088 X $ 41,596,308 41,628,623 41,662,554 41,698,182 $ 646,308 678,623 712,554 748,182 06/30/2022 12/31/2022 826,000,000 $ 8,711,824 Fair Value Adjustment Net Liability(FMV) 01/01/2021 06/30/2021 12/31/2021 01/01/2021 06/30/2021 12/31/2021 Bonds Payable 831,926,157 646,308 678,623 833,251,088 712,554 748,182 834,711,824 $ 3,251,088 3,251,088 $ 830,000,000 06/30/2022 12/31/2022 06/30/2022 12/31/2022 5,460,736 8,711,824 $ 826,000,000

Not sure if I miss calculated? I can't seem to figure this out.

Answer 1

The correct answer has been marked against the wrong one. Kindly take note of the same.

Calculation General Journal Complete the below table to determine the amounts for the journal entries. (Negative amount should be indicated by a minus sign. Round final answers to the nearest whole dollars.) Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Increase in Balance Carrying Value Fair Value Unrealized Holding Gain (loss) 01/01/2021 06/30/2021 12/31/2021 833 251,088-820,000,000= 13,251,088 820.000.000 $ 0,2018 $40,950,000 40,950,000 40,950,000 40,950,000 $ 41,596,308 41,628,623 41,662,554 41,698,182 831,926,157 832,572,465 833,251,088 833,963,642 834,711,824 $ 646,308 678,623 712,554 748,182 06/30/2022 12/31/2022 826,000,000 $ 8,711,824 Bonds Payable Fair Value Adjustment Net Liability(FMV) 01/01/2021 06/30/2021 12/31/2021 01/01/2021 06/30/2021 12/31/2021 13,251,088 $ 3,251,088 820,000,000 831,926,157 646,308 678,623 833,251,088 712,554 748,182 834,711,824 06/30/2022 12/31/2022 06/30/2022 12/31/2022 5,460,736 8,711,824 $ 826,000,000

June 30, 2021 41,596,308 Interest expense Discount on bonds payable Cash 646,308 40,950,000 December 31, 202 Interest expense 41,628,623 Discount on bonds payable Cash 678,623 40,950,000 3 December 31, 202 Fair value adjustment Gain on bonds payable (unrealized, OCI) 13,251,988 9,201,00 13,251,088 2016- June 30, 2022 Interest expense 41,662,554 Discount on bonds payable Cash 712,554 40,950,000 5 748,182 40,950,000 December 31, 202 Interest expense 41,698,182 Discount on bonds payable Cash 13,251,088-8,711,8244,539,264 December 31, 202 Loss on bonds payable (unrealized, NI) O 02% worpeyeble Fair value Adjustment 4,539,264 74,004