Mills Corporation acquired as a long-term Investment $240 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 (yleld) was 6% for bonds of similar risk and maturity. Mills pald $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, 2024, was $265.0 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 $292 million. Prepare the journal entry to record the sale.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
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Chapter1: Financial Statements And Business Decisions
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Mills Corporation acquired as a long-term Investment $240 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 $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, 2024, was $265.0 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 $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
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).
No
1
2
Req 3
> Answer is complete but not entirely correct.
Date
July 01, 2024
Req 4
Investment in bonds
December 31, 2024 Cash
General Journal
Premium on bond investment
Cash
Premium on bond investment
Interest revenue
< Req 1 and 2
Req 3 >
33 3
› › ›
✔
Debit
240.0
40.0✔
7.2 X
Show less
Credit
280.0✔
5.6 x
1.6 X
Transcribed Image Text:Mills Corporation acquired as a long-term Investment $240 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 $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, 2024, was $265.0 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 $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 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). No 1 2 Req 3 > Answer is complete but not entirely correct. Date July 01, 2024 Req 4 Investment in bonds December 31, 2024 Cash General Journal Premium on bond investment Cash Premium on bond investment Interest revenue < Req 1 and 2 Req 3 > 33 3 › › › ✔ Debit 240.0 40.0✔ 7.2 X Show less Credit 280.0✔ 5.6 x 1.6 X
Mills Corporation acquired as a long-term Investment $240 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 (yleld) 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, 2024, was $265.0 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 $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
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 $292 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
5.5).
Show less
No
1
2
Req 3
Answer is complete but not entirely correct.
Req 4
January 02, 2025 Cash
Date
January 02, 2025 No journal entry required
General Journal
Premium on bond investment
Investment in bonds
Gain on investments (NI)
< Req 3
Req 4
Debit
290.0 X
Credit
240.0 X
38.2 x
11.8 x
Transcribed Image Text:Mills Corporation acquired as a long-term Investment $240 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 (yleld) 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, 2024, was $265.0 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 $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 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 $292 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 5.5). Show less No 1 2 Req 3 Answer is complete but not entirely correct. Req 4 January 02, 2025 Cash Date January 02, 2025 No journal entry required General Journal Premium on bond investment Investment in bonds Gain on investments (NI) < Req 3 Req 4 Debit 290.0 X Credit 240.0 X 38.2 x 11.8 x
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