Exercise 12-26 (Algo) Fair value option; available-for-sale investments [L012-2, 12-3, 12-8]Colah Company purchased $3,000,000 of Jackson, Inc., 5% bonds at their face amount on July 1, 2021, with interest paid semi-annually. The bonds mature in 20 years but Cola planned to keep them for less than 3 years, and classified them as available for saleinvestments. When the bonds were acquired Cola decided to elect the fair value option for accounting for its investment. AtDecember 31, 2021, the Jackson bonds had a fair value of $3,400,000. Cola sold the Jackson bonds on July 1. 2022 for $2.700.000.a. The purchase of the Jackson bonds on July 1.b. Interest revenue for the last half of 2021.c. Any year-end 2021 adjusting entries.d. Interest revenue for the first half of 2022.e. Any entry or entries necessary upon sale of the Jackson bonds on July 1, 2022.Required:1. Prepare Colah's journal entries for above transactions.2. Complete the following table to show the effect of the Jackson bonds on Colah's net income, other comprehensive income, and comprehensive income for 2021, 2022, and cumulatively over 2021 and 2022. Exercise 12-11 (Algo) Available-for-sale securities [LO12-1, 12-4]Mills Corporation acquired as a long-term investment $230 million of 8% bonds, dated July 1, on July 1, 2021. Company managementhas classified the bonds as an available-for-sale investment. The market interest rate (yield) was 6% for bonds of similar risk andmaturity. Mills paid $260 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As aresult of changing market conditions, the fair value of the bonds at December 31, 2021, was $250 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 theeffective (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 $270 million. Prepare the journal entries required on the date of sale.Complete this question by entering your answers in the tabs below.Req and 2Req 3Prepare 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter youranswers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)View transaction list<Journal entry worksheet1Req 42Record Mill's investment in the bonds on July 1, 2021.DateJuly 01 2021Note: Enter debits before credits.General JournalDebitCredit>

Answer: 12-11To keep track of a business transaction, the business entities record the transactions…

Answered: Mills Corporation acquired as a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Exercise 12-26 (Algo) Fair value option; available-for-sale investments [L012-2, 12-3, 12-8] Colah Company purchased $3,000,000 of Jackson, Inc., 5% bonds at their face amount on July 1, 2021, with interest paid semi- annually. The bonds mature in 20 years but Cola planned to keep them for less than 3 years, and classified them as available for sale investments. When the bonds were acquired Cola decided to elect the fair value option for accounting for its investment. At December 31, 2021, the Jackson bonds had a fair value of $3,400,000. Cola sold the Jackson bonds on July 1. 2022 for $2.700.000. a. The purchase of the Jackson bonds on July 1. b. Interest revenue for the last half of 2021. c. Any year-end 2021 adjusting entries. d. Interest revenue for the first half of 2022. e. Any entry or entries necessary upon sale of the Jackson bonds on July 1, 2022. Required: 1. Prepare Colah's journal entries for above transactions. 2. Complete the following table to show the effect of the Jackson bonds on Colah's net income, other comprehensive income, and comprehensive income for 2021, 2022, and cumulatively over 2021 and 2022.

Exercise 12-11 (Algo) Available-for-sale securities [LO12-1, 12-4]
Mills Corporation acquired as a long-term investment $230 million of 8% 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 6% for bonds of similar risk and
maturity. Mills paid $260 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 $250 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 $270 million. Prepare the journal entries required on the date of sale.
Complete this question by entering your answers in the tabs below.
Req and 2
Req 3
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. (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).)
View transaction list
<
Journal entry worksheet
1
Req 4
2
Record Mill's investment in the bonds on July 1, 2021.
Date
July 01 2021
Note: Enter debits before credits.
General Journal
Debit
Credit
>

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