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Mills Corporation acquired as a long - term investment $ 2 4 0 million of 7 % bonds, dated July 1 , on July 1
Mills Corporation acquired as a longterm investment $ million of bonds, dated July on July Company management has classified the bonds as an availableforsale investment. The market interest rate yield was for bonds of similar risk and maturity. Mills paid $ million for the bonds. The company will receive interest semiannually on June and December As a result of changing market conditions, the fair value of the bonds at December was $ million.
Required:
& : Prepare the journal entry to record Mills' investment in the bonds on July and interest on December at the effective market rate.
: At what amount will Mills report its investment in the December balance sheet?
: Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January for $ million. Prepare the journal entries to record the fairvalue adjustment. Then prepare the journal entry to record any reclassification adjustment. Then prepare the journal entry to record the sale of the investment by Mills.
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