Mills Corporation acquired as a long-term investment $270 million of 8% bonds, dated July 1, on July 1, 2024. 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 $310 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, 2024, was $290 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 theeffective (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 $320 million. Prepare the journal entries required on the date of sale.Answer is not complete.Complete this question by entering your answers in the tabs below.Req 1 and 2Req 3Req 4Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment onJanuary 2, 2025, for $320 million. Prepare the journal entries required on the date of sale.Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not roundintermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as5.5).12NoDateJanuary 02, 2025 Fair value adjustmentGeneral JournalGain on investment (unrealized, OCI)January 02, 2025 Reclassification adjustment (OCI)Loss on investment (unrealized, NI)3January 02, 2025 CashInvestment in bondsPremium on bond investmentGain on investment (NI)Show less▲DebitCredit320.0270.038.511.5

A bond is a fixed-income security that simulates a loan to a borrower (usually a government agency…

Mills Corporation acquired as a long-term investment $270 million of 8% 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 6% for bonds of similar risk and maturity. Mills paid $310 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 $290 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 $320 million. Prepare the journal entries required on the date of sale.

Mills Corporation acquired as a long-term investment $270 million of 8% 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 6% for bonds of similar risk and maturity. Mills paid $310 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 $290 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 $320 million. Prepare the journal entries required on the date of sale.

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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