This is a variation of E 12–2 focusing on trading securities.]Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2018.Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate(yield) was 4% for bonds of similar risk and maturity. Mills paid $280 million for the bonds. The company willreceive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fairvalue of the bonds at December 31, 2018, was $270 million.Required:1. Prepare the journal entry to record Mills’ investment in the bonds on July 1, 2018.2. Prepare the journal entries by Mills to record interest on December 31, 2018, at the effective (market) rate.
This is a variation of E 12–2 focusing on trading securities.]
Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2018.
Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate
(yield) was 4% for bonds of similar risk and maturity. Mills paid $280 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, 2018, was $270 million.
Required:
1. Prepare the
2. Prepare the journal entries by Mills to record interest on December 31, 2018, at the effective (market) rate.
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