Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $830 million on January 1, 2024. ⚫ The bonds sold for $767,557,868 and mature on December 31, 2043 (20 years). • For bonds of similar risk and maturity the market yield was 12%. • 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, 2024, the fair value of the bonds was $750 million as determined by their market value in the over-the-counter market
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $830 million on January 1, 2024. ⚫ The bonds sold for $767,557,868 and mature on December 31, 2043 (20 years). • For bonds of similar risk and maturity the market yield was 12%. • 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, 2024, the fair value of the bonds was $750 million as determined by their market value in the over-the-counter market
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Exercise 14-29 (Algo) Reporting bonds at fair value [LO14-6]
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $830 million on January
1, 2024.
. The bonds sold for $767,557,868 and mature on December 31, 2043 (20 years).
• For bonds of similar risk and maturity the market yield was 12%.
• 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, 2024, the fair value of the bonds was $750 million as determined by their market
value in the over-the-counter market
Assume the fair value of the bonds on December 31, 2025, had risen to $756 million.
Required:
Complete the below table to record the following journal entries
1. & 2. Prepare the journal entries to record interest on June 30, 2024, December 31, 2024, and adjust the
bonds to their fair value for presentation in the December 31, 2024 balance sheet, and record interest on
June 30, 2025, December 31, 2025, and adjust the bonds to their fair value for presentation in the
December 31, 2025, balance sheet. Federal determined that none of the change in fair value in 2024 was
due to a decline in general interest rates and one-half of the increase in fair value in 2025 was due
decline in general interest rates.
Complete this question by entering your answers in the tabs below.
a
Calculation
General
Journal
Complete the below table to determine the amounts for the journal entries.
Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answers to the nearest whole dollars.
Semiannual
Interest
Period-End
Cash Interest Bond Interest
Paid
Expense
Increase in
Balance
Carrying Value
Fair Value
01/01/2024
06/30/2024
$ 767,557,868
Fair value
adjustment
balance needed
S
0
Increase
(decrease)
in Fair value
adjustment](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4bc4094d-d2ac-4b95-bc8f-5878e9123bfd%2F76e8dfb8-f9c8-4bc6-8a9a-40f34ba119fb%2Flcm3es_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 14-29 (Algo) Reporting bonds at fair value [LO14-6]
Federal Semiconductors issued 11% bonds, dated January 1, with a face amount of $830 million on January
1, 2024.
. The bonds sold for $767,557,868 and mature on December 31, 2043 (20 years).
• For bonds of similar risk and maturity the market yield was 12%.
• 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, 2024, the fair value of the bonds was $750 million as determined by their market
value in the over-the-counter market
Assume the fair value of the bonds on December 31, 2025, had risen to $756 million.
Required:
Complete the below table to record the following journal entries
1. & 2. Prepare the journal entries to record interest on June 30, 2024, December 31, 2024, and adjust the
bonds to their fair value for presentation in the December 31, 2024 balance sheet, and record interest on
June 30, 2025, December 31, 2025, and adjust the bonds to their fair value for presentation in the
December 31, 2025, balance sheet. Federal determined that none of the change in fair value in 2024 was
due to a decline in general interest rates and one-half of the increase in fair value in 2025 was due
decline in general interest rates.
Complete this question by entering your answers in the tabs below.
a
Calculation
General
Journal
Complete the below table to determine the amounts for the journal entries.
Note: Negative amount should be indicated by a minus sign. Round intermediate calculations and final answers to the nearest whole dollars.
Semiannual
Interest
Period-End
Cash Interest Bond Interest
Paid
Expense
Increase in
Balance
Carrying Value
Fair Value
01/01/2024
06/30/2024
$ 767,557,868
Fair value
adjustment
balance needed
S
0
Increase
(decrease)
in Fair value
adjustment
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