Exercise 12-6 (Algo) Trading securities [LO12-1, 12-3] Mills Corporation acquired as an investment $260 million of 7% bonds, dated July 1, on July 1, 2024. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 5% for bonds of similar risk and maturity. Mills paid $320 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, 2024, was $300 million. Required: 1. & 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. 3. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2024. 4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2025, for $330 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Show less▲ View transaction list View journal entry worksheet (×
Exercise 12-6 (Algo) Trading securities [LO12-1, 12-3] Mills Corporation acquired as an investment $260 million of 7% bonds, dated July 1, on July 1, 2024. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 5% for bonds of similar risk and maturity. Mills paid $320 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, 2024, was $300 million. Required: 1. & 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. 3. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2024. 4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2025, for $330 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Show less▲ View transaction list View journal entry worksheet (×
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Exercise 12-6 (Algo) Trading securities [LO12-1, 12-3]
Mills Corporation acquired as an investment $260 million of 7% bonds, dated July 1, on July 1, 2024. Company management is holding
the bonds in its trading portfolio. The market interest rate (yield) was 5% for bonds of similar risk and maturity. Mills paid $320 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, 2024, was $300 million.
Required:
1. & 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the
effective (market) rate.
3. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2024.
4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2,
2025, for $330 million. Prepare the journal entries required on the date of sale.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Req 4
Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective
(market) rate.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round
intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).
View transaction list View journal entry worksheet
Show less▲](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6ab5d67d-9ef1-4ae7-a536-0ac923b99a00%2F14d7e42a-5f60-45c8-8ed0-50cf5ff29a04%2Fcg5rm8m_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 12-6 (Algo) Trading securities [LO12-1, 12-3]
Mills Corporation acquired as an investment $260 million of 7% bonds, dated July 1, on July 1, 2024. Company management is holding
the bonds in its trading portfolio. The market interest rate (yield) was 5% for bonds of similar risk and maturity. Mills paid $320 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, 2024, was $300 million.
Required:
1. & 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the
effective (market) rate.
3. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2024.
4. Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2,
2025, for $330 million. Prepare the journal entries required on the date of sale.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Req 4
Prepare the journal entry to record Mills' investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective
(market) rate.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round
intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).
View transaction list View journal entry worksheet
Show less▲
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