Mills Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on...
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Mills Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on July 1, 2021. 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 $240 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 $210 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 $250 million. Prepare the journal entries required on the date of sale. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 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 $250 million. Prepare the journal entries required on the date of sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).) 1 No Date January 02, 2022 Fair value adjustment General Journal Gain on investment (unrealized, OCI) 2 January 02, 2022 Reclassification adjustment (OCI) Fair value adjustment 3 January 02, 2022 Cash Gain on investment (NI) Premium on bond investment Investment in bonds Show less Debit Credit 40.0 40.0 30.0 0.0 250.0 11.0 39.0 200.0 Mills Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on July 1, 2021. 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 $240 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 $210 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 $250 million. Prepare the journal entries required on the date of sale. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 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 $250 million. Prepare the journal entries required on the date of sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).) 1 No Date January 02, 2022 Fair value adjustment General Journal Gain on investment (unrealized, OCI) 2 January 02, 2022 Reclassification adjustment (OCI) Fair value adjustment 3 January 02, 2022 Cash Gain on investment (NI) Premium on bond investment Investment in bonds Show less Debit Credit 40.0 40.0 30.0 0.0 250.0 11.0 39.0 200.0
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