On January 1, 2021, Rapid Airlines issued $275 million of its 10% bonds for $254 million. The bonds were priced to yield 12%. Interest ispayable semiannually on June 30 and December 31. Rapid Airlines records interest at the effective rate and elected the option toreport these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $264 million as determined by theirmarket value in the over-the-counter market. Rapid determined that $1,000,000 of the increase in fair value was due to a decline ingeneral interest rates.Required:1. to 3. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the secondinterest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet. (Enter youranswers in whole dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first accountfield.)Answer is not complete.General JournalDebitCredit9,200,000 ×1,200,000 ×8,000,000 xNo1DateJune 30, 2021Interest expenseDiscount on bonds payableCash233December 31, 202 Interest expenseDiscount on bonds payableCashDecember 31, 202 Loss on bonds payable (unrealized, NI)Loss on bonds payable (unrealized, OCI)

Bonds payable is a type of instrument where by an amount is borrowed for a fixed period with fixed…

On January 1, 2021, Rapid Airlines issued $275 million of its 10% bonds for $254 million. The bonds were priced to yield 12%. 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, 2021, the fair value of the bonds was $264 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.

On January 1, 2021, Rapid Airlines issued $275 million of its 10% bonds for $254 million. The bonds were priced to yield 12%. 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, 2021, the fair value of the bonds was $264 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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