On January 1, 2024, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. • The bonds were 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. . On December 31, 2024, the market interest rate for bonds of similar risk and maturity was 9%. • 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. Required: 1. Using the information provided, estimate the fair value of the bonds at December 31, 2024. 2. to 4. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.

On January 1, 2024, Essence Communications issued $800,000 of its 10-year, 8% bonds for $700,302. • The bonds were 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. . On December 31, 2024, the market interest rate for bonds of similar risk and maturity was 9%. • 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. Required: 1. Using the information provided, estimate the fair value of the bonds at December 31, 2024. 2. to 4. Prepare the journal entries to record interest on June 30, 2024 (the first interest payment), on December 31, 2024 (the second interest payment) and to adjust the bonds to their fair value for presentation in the December 31, 2024, balance sheet.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...

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