Mills Corporation acquired as a long-term investment $270 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 $310 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 $290 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 $320 million. Prepare the journal entries required on the date of sale.Answer is not complete.Complete this question by entering your answers in the tabs below.Req 1 and 2Req 3Req 4Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment onJanuary 2, 2025, for $320 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).12NoDateJanuary 02, 2025 Fair value adjustmentGeneral JournalGain on investment (unrealized, OCI)January 02, 2025 Reclassification adjustment (OCI)Loss on investment (unrealized, NI)3January 02, 2025 CashInvestment in bondsPremium on bond investmentGain on investment (NI)Show less▲DebitCredit320.0270.038.511.5

A bond is a fixed-income security that simulates a loan to a borrower (usually a government agency…

Mills Corporation acquired as a long-term investment $270 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 $310 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 $290 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 $320 million. Prepare the journal entries required on the date of sale.

Mills Corporation acquired as a long-term investment $270 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 $310 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 $290 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 $320 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

See similar textbooks

Similar questions

During 2021, Anthony Company purchased debt securities as a long-term investment and classified them as trading. All securities were purchased at par value. Pertinent data are as follows: The net holding gain or loss included in Anthonys income statement for the year should be: a. 0 b. 3,000 gain c. 9,000 loss d. 12,000 loss
Refer to the information in RE13-5. Assume that on December 31, 2019, the investment in Smith Corporation bonds has a market value of 12,500. Prepare the year-end journal entry to record the unrealized gain or loss.
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July1, 2018. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200million for the bonds. The company will receive interest semiannually on June 30 and December 31. Companymanagement is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair valueof the bonds at December 31, 2018, was $210 million.Required:1. Prepare the journal entry to record Tanner-UNF’s investment in the bonds on July 1, 2018.2. Prepare the journal entries by Tanner-UNF to record interest on December 31, 2018, at the effective (market)rate.3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31,2018, balance sheet.4. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sellthe investment on January 2, 2019, for $190 million. Prepare…
Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Tanner-UNF paid $220 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $230 million. Record the entry to adjust the fair value.
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January1, on January 1, 2018. Management has the positive intent and ability to hold the bonds until maturity. For bondsof similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest isreceived semiannually on June 30 and December 31. Due to changing market conditions, the fair value of thebonds at December 31, 2018, was $70 million.Required:1. Prepare the journal entry to record Fuzzy Monkey’s investment on January 1, 2018.2. Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2018 (at the effective rate).3. Prepare the journal entries by Fuzzy Monkey to record interest on December 31, 2018 (at the effective rate).4. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet? Why?5. How would Fuzzy Monkey’s 2018 statement of cash flows be affected by this investment?
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $210 million. 1. Prepare any journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet. 2. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $190 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale PLEASE SHOW WORK
Mills Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on July 1, 2024. 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 $300.0 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 $280.0 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 $314 million. Prepare the journal entry to record the sale.
Mills Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on July 1, 2024. 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 $300.0 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 $280.0 million. At what amount will Mills report its investment in the December 31, 2024, balance sheet? 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 entry to record the sale.
Tanner-UNF Corporation acquired as a long-term investment $245 million of 8% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $205 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.
The Dandelion corporation acquired as a long-term investment $240,000 of 6% bonds, dated July 1, on July 1, 2023. Dandelion management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds of similar risk and maturity. The company paid $200,000 for the bonds and 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, 2023, was $210,000. The entry for interest expense has not been recorded yet. Prepare the according journal entries and entry on the balance sheet for year end 2023.
Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $270.0 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 $260.0 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. At what amount will Mills report its investment in the December 31, 2021, 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, 2022, for $280 million. Prepare the journal entry to record the sale.
Tanner-unf corporation acquired as a long-term investment 245 million of 8% bonds, dated July 1, on July1, 2018. The market interest rate (yield) was 10% for bonds of similiar risk and maturity. Tanner-UNF paid 200 million for the bonds. the company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading profolio. as a result of changing market conditions the fair value of the bonds at december 31, 2018 was 205 million. 1 and 2 prepare journal entry to record Tannner-UNF'S investment in bonds on July 1,2018 and interest on December 31,2018 at the effective (market rate). 3 Prepare any additional journal entry neccessary for Tannner-UNF to report its investment in the December 31,2018 balance sheet 4 Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell investments on January 2,2019 for 180 Million. Prepare the journal entries to record the sale.