Ladio-VOG Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, year 2018. Company management is holding the bond in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Ladio-VOG paid $200 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, year 2018, was $210 million.

Required: Prepare the journal entry to record Ladio-VOG's investment in the bonds on July 1, 2018. Prepare the journal entries by Ladio-VOG to record interest on December 31, 2018, at the effective (market) rate. At what amount will Ladio-VOG report its investment in the December 31, 2018, balance sheet? Why? Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Ladio-VOG to sell the investment on January 2, 2019, for $190 million. Prepare the journal entry to record the sale.