(Note: This is a variation of E 14-13 modified to consider the fair value option for reporting liabilities.) Federal Semiconductors issued 11% bonds, dated January 1. with a face amount of $800 million on January 1. 2018. The bonds sold for $739,814,813 and mature on December 31. 2037 (20 years). For bonds of similar risk and maturity the market yield was 12% Interest is paid semiannually on June 30 and December 31. Federal determines interest at the effective rate. Federal elected the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $730 million as determined by their market value in the over-the-counter market.
Required:
1. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2018. is balance sheet. Federal determined that none of the change in fair value was due to a decline in general interestrates.
2. Assume the fair value of the bonds on December 31. 2019. had risen to $736 million. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2019. balance sheet. Federal determined that one-half of the increase in fair value was due to a decline in general interest rates.

On January 1. 2018. Rapid Airlines issued $200 million of its 8% bonds for $184 million. The bonds were priced to yield 10% 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, 2018. the fair value of the bonds was $188 million as determined by their market value in the over-the-counter market. Rapid deter- mined that $1,000,000 of the increase in fair value was due to a decline in general interest rates.
Required:
1. Prepare the journal entry to record interest on June 30. 2018 (the first interest payment).
2. Prepare the journal entry to record interest on December 31, 2018 (the second interest payment).
3. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31. 2018. balance sheet.

On bonds were priced at $140 million (plus accrued interest) to yield 12%. Interest is paid semiannually on June 30 March 1. 2018, Baddour, Inc., issued 10% bonds, dated January 1. with a face amount of $160 million. The and December 31. Baddour's fiscal year ends September 30.
Required:
1. What would be the amount(s) related to the bonds Baddour would report in its balance sheet at September 30.
2. What 2018? would be the amount(s) related to the bonds that Baddour would report in its income statement for the
3. year What would be the amount(s) related to the bonds that Baddour would report in its statement of cash flows ended September 30. 2018? for the year ended September 30, 2018?

(Note: This is a variation of E 14-13 modified to consider the fair...