On January 1, 2018, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. The bondswere 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. OnDecember 31, 2018, the market interest rate for bonds of similar risk and maturity was 9%. The bonds are nottraded on an active exchange. The increase in the market interest rate was due to a 1% increase in general (riskfree) interest rates.Required:1. Using the information provided, estimate the fair value of the bonds at December 31, 2018.2. Prepare the journal entry to record interest on June 30, 2018 (the first interest payment).3. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018,balance sheet
On January 1, 2018, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. The
were priced
December 31, 2018, the market interest rate for bonds of similar risk and maturity was 9%. The bonds are not
traded on an active exchange. The increase in the market interest rate was due to a 1% increase in general (riskfree) interest rates.
Required:
1. Using the information provided, estimate the fair value of the bonds at December 31, 2018.
2. Prepare the
3. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).
4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018,
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