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Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2024. 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 $270.0 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, 2024, was $260.0 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. At what amount will Mills report its investment in the December 31, 2024, 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, 2025, for $280 million. Prepare the journal entry to record the sale.

Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2024. 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 $270.0 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, 2024, was $260.0 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. At what amount will Mills report its investment in the December 31, 2024, 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, 2025, for $280 million. Prepare the journal entry to record the sale.

FINANCIAL ACCOUNTING
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 $235 million of 8% bonds, dated July 1, on July 1, 2024. 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 $270.0 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, 2024, was $260.0 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. At what amount will Mills report its investment in the December 31, 2024, 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, 2025, for $280 million. Prepare the journal entry to record the sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on Janual for $280 million. Prepare the journal entry to record the sale. 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. SI View transaction list No Req 3 1 2 Date January 02, 2025 January 02, 2025 Req 4 View journal entry worksheet No journal entry required Cash Investment in bonds General Journal Gain on investments (NI) < Req 3 Req 4 > Debit 280.0 268.7 Credit 11.3
Transcribed Image Text:Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2024. 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 $270.0 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, 2024, was $260.0 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. At what amount will Mills report its investment in the December 31, 2024, 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, 2025, for $280 million. Prepare the journal entry to record the sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on Janual for $280 million. Prepare the journal entry to record the sale. 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. SI View transaction list No Req 3 1 2 Date January 02, 2025 January 02, 2025 Req 4 View journal entry worksheet No journal entry required Cash Investment in bonds General Journal Gain on investments (NI) < Req 3 Req 4 > Debit 280.0 268.7 Credit 11.3
Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2024. 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 $270.0 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, 2024, was $260.0 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. At what amount will Mills report its investment in the December 31, 2024, 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, 2025, for $280 million. Prepare the journal entry to record the sale. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 and 2 No 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). 1 Req 3 2 Date July 01, 2024 Req 4 Investment in bonds Cash December 31, 2024 Cash General Journal Premium on bond investment Interest revenue Debit 270.0 9.4 1.3 X Show less Credit 270.0 8.1
Transcribed Image Text:Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2024. 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 $270.0 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, 2024, was $260.0 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. At what amount will Mills report its investment in the December 31, 2024, 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, 2025, for $280 million. Prepare the journal entry to record the sale. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 and 2 No 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). 1 Req 3 2 Date July 01, 2024 Req 4 Investment in bonds Cash December 31, 2024 Cash General Journal Premium on bond investment Interest revenue Debit 270.0 9.4 1.3 X Show less Credit 270.0 8.1
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