Record entry to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2024, Rapid Airlines issued $205 million of its 6% bonds for $188 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 $194 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.

 

Record entry to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.

3
December 31, 202 Loss on bonds payable (unrealized, NI)
Loss on bonds payable (unrealized, OCI)
Fair value adjustment
1,000,000
Transcribed Image Text:3 December 31, 202 Loss on bonds payable (unrealized, NI) Loss on bonds payable (unrealized, OCI) Fair value adjustment 1,000,000
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