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Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 3% for bonds of similar risk and maturity. Mills paid $300 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 $280 million. 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 $315 million. Prepare the journal entries required on the date of the sale. 1) The recorded fair value adjustment is 35.0 January 2, 2025 Fair value adjustment 35.0 Gain on investment (unrealized,OCI) 35.0 * 2) record any reclassification adjustment and what would the amortization schedule look like?

Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 3% for bonds of similar risk and maturity. Mills paid $300 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 $280 million. 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 $315 million. Prepare the journal entries required on the date of the sale. 1) The recorded fair value adjustment is 35.0 January 2, 2025 Fair value adjustment 35.0 Gain on investment (unrealized,OCI) 35.0 * 2) record any reclassification adjustment and what would the amortization schedule look like?

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 1RE
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Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on July 1, 2024. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 3% for bonds of similar risk and maturity. Mills paid $300 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 $280 million. 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 $315 million. Prepare the journal entries required on the date of the sale. 1) The recorded fair value adjustment is 35.0 January 2, 2025 Fair value adjustment 35.0 Gain on investment (unrealized,OCI) 35.0 * 2) record any reclassification adjustment and what would the amortization schedule look like?
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