**Mills Corporation Bonds Investment Journal Entry**Mills Corporation acquired an investment of $220 million in 6% bonds, dated July 1, on July 1, 2021. The company management holds the bonds in its trading portfolio. The market yield was 4% 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. Due to changing market conditions, the bonds' fair value on December 31, 2021, was $240 million.**Requirements:**1 & 2. Record the journal entry for Mills’ investment in the bonds on July 1, 2021, and interest on December 31, 2021, at the effective market rate.3. Record the journal entry for any fair value adjustment necessary for the year ended December 31, 2021.4. Moody's bond rating agency upgraded the risk rating, leading Mills to sell the investment for $272 million on January 2, 2022. Record the journal entries required on the sale date.**Instructions for Completing the Journal Entries:**- Use the tabs below to submit your answers.- For fair value adjustments, if a transaction/event does not require an entry, select "No journal entry required."- Answers should be in millions, rounded to one decimal place (e.g., $5,500,000 should be entered as 5.5).**Journal Entry Worksheet Example:**December 31, 2021:- **Debit**: - Investment: $258.6 million- **Credit**: - Gain on investment (unrealized, NI): $39 million - Fair value adjustment: $259 millionEnter debits before credits while recording entries.

INTRODUCTION Investment in securities portfolio for trading purposes should be measured at fair value through profit or loss, if the intention of the entity is to sell the financial assets in near future.SOLUTION 1. & 2. Journal Entries3.4.

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Mills Corporation acquired as an investment $220 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 4% 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 $240 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. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2021. 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 $272 million. Prepare the journal entries required on the date of sale.

Mills Corporation acquired as an investment $220 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 4% 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 $240 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. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2021. 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 $272 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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