Mills Corporation acquired as a long-term investment $245 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 $280 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 $260 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 $295 million. Prepare the journal entries required on the date of sale.Req 1 and 21Complete this question by entering your answers in the tabs below.23Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment onJanuary 2, 2025, for $295 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).NoReq 3DateJanuary 02, 2025X Answer is complete but not entirely correct.Req 4January 02, 2025 CashGeneral JournalFair value adjustmentGain on investment (unrealized, OCI)January 02, 2025 Reclassification adjustment (OCI)Fair value adjustmentPremium on bond investmentGain on investment (NI)Investment in bonds33Debit290.0 X11.2 X290.0 XCreditShow less240.0 X11.2 x38.6 x11.2 X245.0

Mills Corporation acquired as a long-term investment $245 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 $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, 2024, was $260 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 $295 million. Prepare the journal entries required on the date of sale.

Mills Corporation acquired as a long-term investment $245 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 $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, 2024, was $260 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 $295 million. Prepare the journal entries required on the date of sale.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1MC

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