Concept explainers
Trading securities
• LO12-1
[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 is holding the bonds in its trading portfolio. 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.
3. At what amount will Mills report its investment in the December 31, 2018,
4. Suppose Moody’s bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2019, for $290 million. Prepare the journal entry to record the sale.

Want to see the full answer?
Check out a sample textbook solution
Chapter 12 Solutions
INTERMEDIATE ACTG+CONNECT <LOOSE>
- Can you explain the process for solving this financial accounting question accurately?arrow_forwardPlease provide the correct answer to this general accounting problem using accurate calculations.arrow_forwardPlease provide the answer to this general accounting question with proper steps.arrow_forward
- Can you solve this general accounting question with accurate accounting calculations?arrow_forwardI am searching for the accurate solution to this general accounting problem with the right approach.arrow_forwardCan you provide the accurate answer to this financial accounting question using correct methods?arrow_forward
- I need guidance with this financial accounting problem using the right financial principles.arrow_forwardI need help finding the accurate solution to this general accounting problem with valid methods.arrow_forwardPlease provide the correct answer to this general accounting problem using valid calculations.arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTFinancial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning



