Mills Corporation acquired as a long$-$term investment $$240$ million of $7\%$ bonds, dated July $1,$ on July $1,2024.$ Company management has classified the bonds as an available$-$for$-$sale investment. The market interest rate $($yield$)$ was $5\%$ for bonds of similar risk and maturity. Mills paid $$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 $$290$ million. Prepare the journal entries to record the fair$-$value 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.