Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Mills paid $280 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $270 million. Required:3. At what amount will Mills report its investment in the December 31, 2021, balance sheet? Req 1 and 2NoSuppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment onJanuary 2, 2022, for $290 million. Prepare the journal entries required on the date of sale. (If no entry is required for atransaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1decimal place, (i.e., 5,500,000 should be entered as 5.5).)12Req 33Req 4DateJanuary 02, 2022 Fair value adjustmentJanuary 02, 2022 CashGeneral JournalJanuary 02, 2022 Reclassification adjustment (OCI)Fair value adjustmentGain on investment (NI)Premium on bond investmentInvestment in bonds< Req 3Req 4Debit20.011.6290.0Credit20.011.611.638.4240.0Show less A

Premium on Bond's :— It implies that Face Value of Bond is Less than Carrying Value Or Market Value…

Answered: At what amount will Mills report its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 4% for bonds of similar risk and maturity. Mills paid $280 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $270 million.

Required:
3. At what amount will Mills report its investment in the December 31, 2021, balance sheet?

Req 1 and 2
No
Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on
January 2, 2022, for $290 million. Prepare the journal entries required on the date of sale. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1
decimal place, (i.e., 5,500,000 should be entered as 5.5).)
1
2
Req 3
3
Req 4
Date
January 02, 2022 Fair value adjustment
January 02, 2022 Cash
General Journal
January 02, 2022 Reclassification adjustment (OCI)
Fair value adjustment
Gain on investment (NI)
Premium on bond investment
Investment in bonds
< Req 3
Req 4
Debit
20.0
11.6
290.0
Credit
20.0
11.6
11.6
38.4
240.0
Show less A

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