I don't know how to answer Req 4, there are 2 questions. -NO 1. Prepare any journal entry needed to adjust the investment to fair value -NO.2 Record the sale of the investment by Mills. Could you show me what's the item I need to write in the journal entry as well as how to calculate the number? show me step by step with an explanation?
I don't know how to answer Req 4, there are 2 questions. -NO 1. Prepare any journal entry needed to adjust the investment to fair value -NO.2 Record the sale of the investment by Mills. Could you show me what's the item I need to write in the journal entry as well as how to calculate the number? show me step by step with an explanation?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
I don't know how to answer Req 4, there are 2 questions.
-NO 1. Prepare any
-NO.2 Record the sale of the investment by Mills.
Could you show me what's the item I need to write in the journal entry as well as how to calculate the number? show me step by step with an explanation?
![Exercise 12-2 (Algo) Securities held-to-maturity; bond investment; effective interest, premium [LO12-1]
Mills Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management
has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and
maturity. Mills paid $280.0 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 $265.0 million.
Required:
1. & 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the
effective (market) rate.
3. At what amount will Mills report its investment in the December 31, 2021, balance sheet?
4. 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 $292 million. Prepare the journal entry to record the sale.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Req 4
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 $292 million. Prepare the journal entry to record the 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).)
Show less A](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd9bed3f1-3476-41df-94aa-d1dd035d2f95%2F616acac8-13a1-46ca-a6d4-dea2b4fa9c84%2Fht44nt_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 12-2 (Algo) Securities held-to-maturity; bond investment; effective interest, premium [LO12-1]
Mills Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management
has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and
maturity. Mills paid $280.0 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 $265.0 million.
Required:
1. & 2. Prepare the journal entry to record Mills' investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the
effective (market) rate.
3. At what amount will Mills report its investment in the December 31, 2021, balance sheet?
4. 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 $292 million. Prepare the journal entry to record the sale.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Req 4
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 $292 million. Prepare the journal entry to record the 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).)
Show less A
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1 and 2
Req 3
Req 4
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 $292 million. Prepare the journal entry to record the 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).)
Show less A
View transaction list
View journal entry worksheet
No
Date
General Journal
Debit
Credit
January 02,
2022
1
Premium on bond investment
27
Gain on investments (NI)
27
January 02,
2022
Cash
292.0
Gain on investments (NI)
50.8
Investment in bonds
240.0
Premium on bond investment
1.2
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