On January 1, 2021, Essence Communications issued $700,000 of its 10-year, 10% bonds for $619,711. The bonds were priced to yield12%. Interest is payable semiannually on June 30 and December 31. Essence Communications records interest at the effective rate andelected the option to report these bonds at their fair value. On December 31, 2021, the market interest rate for bonds of similar risk andmaturity was 11%. The bonds are not traded on an active exchange. The decrease in the market interest rate was due to a 1% decreaseIn general (risk-free) interest rates. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s)from the tables provided.)Required:1. Using the information provided, estimate the fair value of the bonds at December 31, 2021.2. to 4. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the secondInterest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet.Complete this question by entering your answers in the tabs below.Req 1Req 1Using the information provided, estimate the fair value of the bonds at December 31, 2021. (Round final answer to thenearest whole dollar.)Fair value of the bondsNo1Req 2 to 42Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (thesecond interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance.sheet. (If no entries is required for a transaction/event, select "No journal entries required" in the first account field. Roundfinal answers to the nearest whole dollars.)3Answer is complete but not entirely correct.Req 2 to 4DateJune 30, 2021$ 658,174 XGeneral JournalInterest expenseDiscount on bonds payableCashDecember 31, 202 Interest expenseDiscount on bonds payableCashDecember 31, 202 Loss on bonds payable (unrealized, NI)Fair value adjustment000 000✔✔Debit37,18337,31433,966 XCredit2,18335,0002,31435,00033,966 xShow less A

Amount are rounded of therefore value are approximate.

On January 1, 2021, Essence Communications issued $700,000 of its 10-year, 10% bonds for $619,711. The bonds were priced to yield 12%. 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. On December 31, 2021, the market interest rate for bonds of similar risk and maturity was 11%. The bonds are not traded on an active exchange. The decrease in the market interest rate was due to a 1% decrease In general (risk-free) interest rates. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Using the information provided, estimate the fair value of the bonds at December 31, 2021. 2. to 4. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the second Interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet.

On January 1, 2021, Essence Communications issued $700,000 of its 10-year, 10% bonds for $619,711. The bonds were priced to yield 12%. 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. On December 31, 2021, the market interest rate for bonds of similar risk and maturity was 11%. The bonds are not traded on an active exchange. The decrease in the market interest rate was due to a 1% decrease In general (risk-free) interest rates. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. Using the information provided, estimate the fair value of the bonds at December 31, 2021. 2. to 4. Prepare the journal entries to record interest on June 30, 2021 (the first interest payment), on December 31, 2021 (the second Interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 16E

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