Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mills Corporation acquired as a long - term investment $ 2 4 0 million of 6 % bonds, dated July 1 , on July 1

Mills Corporation acquired as a long-term investment $240 million of 6% 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 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 31,2024, was $270 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 Moodys bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2,2025, for $290 million. Prepare the journal entries required on the date of sale. Record the sale of the investment by Mills.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Crosson

9th Edition

B00650WABQ

More Books

Students also viewed these Accounting questions

Question

9. Describe the characteristics of power.

Answered: 1 week ago