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On January 1, 2018, Essence Communications issued $610,000 ofits 10-year, 6% bonds for $457,961. The bonds were priced to yield10%. 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. OnDecember 31, 2018, the market interest rate for bonds of similarrisk and maturity was 9%. The bonds are not traded on an activeexchange. The increase in the market interest rate was due to a 1%increase in general (risk-free)interest rates. (FV of $1, PV of $1,FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriatefactor(s) from the tables provided.) Required: 1. Using theinformation provided, estimate the fair value of the bonds atDecember 31, 2018. 2. to 4. Prepare the journal entry to recordinterest on June 30, 2018 (the first interest payment), on December31, 2018 (the second interest payment) and to adjust the bonds totheir fair value for presentation in the December 31, 2018, balancesheet.