1. to 3. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second nterest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.
1. to 3. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second nterest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dhapa
Transcribed Image Text:On January 1, 2024, Rapid Airlines issued $280 million of its 6% bonds for $257 million.
. The bonds were priced to yield 8%.
• Interest is payable semiannually on June 30 and December 31.
●
·
Rapid Airlines records interest at the effective rate and elected the option to report these bonds at their fair value.
On December 31, 2024, the fair value of the bonds was $270 million as determined by their market value in the over-the-counter
market.
Rapid determined that $1,000,000 of the increase in fair value was due to a decline in general interest rates.
Required:
1. to 3. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second
interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.
Note: Enter your answers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the
first account field.
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