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 $314 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 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 Date January 02, 2025 General Journal Fair value adjustment Gain on investment (unrealized, OCI) ›› Debit 34.0 Credit 34.0 Show less
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 $314 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 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 Date January 02, 2025 General Journal Fair value adjustment Gain on investment (unrealized, OCI) ›› Debit 34.0 Credit 34.0 Show less
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Record any reclassification adjustment.
Transcribed Image Text:Req 1 and 2
No
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 $314 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 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
2
Req 3
3
Date
January 02, 2025
Req 4
General Journal
Fair value adjustment
Gain on investment (unrealized, OCI)
January 02, 2025 Cash
January 02, 2025 Reclassification adjustment (OCI)
Fair value adjustment
Investment in bonds
Premium on bond investment
Gain on investment (NI)
Debit
34.0
34.0 x
314.0
Credit
34.0
34.0
260.0
38.2
15.8
Show less A
![Exercise 12-11 (Algo) Available-for-sale securities; financial statement effects [LO12-1, 12-4]
Mills Corporation acquired as a long-term investment $260 million of 6% 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 4% 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.
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 upgrad
the risk rating of the bonds, and Mills decided to sell the investment on January 2,
2025, for $314 million. Prepare the journal entries required on the date of sale.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6bf7e86d-f514-4dad-9e2d-6c65eac4b34a%2Fb3f46bdf-cd82-4e9d-a06f-f726ab727f5b%2Fv9w9y1h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 12-11 (Algo) Available-for-sale securities; financial statement effects [LO12-1, 12-4]
Mills Corporation acquired as a long-term investment $260 million of 6% 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 4% 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.
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 upgrad
the risk rating of the bonds, and Mills decided to sell the investment on January 2,
2025, for $314 million. Prepare the journal entries required on the date of sale.
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