Mills Corporation acquired as a long-term investment $230 million of 8% 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 6% for bonds of similar risk and maturity. Mills paid $260 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 $250 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 $270 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req3 Req 4 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. (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).) View transaction list View journal entry worksheet No Date General Journal Debit Credit 1 July 01, 2021 Investment in bonds 230.0 Premium on bond investment 30.0 Cash 260.0 N December 31, 2021 Cash 9.2 Premium on bond investment 1.4 Interest revenue 7.8 Req 1 and 2 Req3 > 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 $270 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 Reg 4 At what amount will Mills report its investment in the December 31, 2021, balance sheet? Investment $ 258,600,000 million 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 $270 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).) Show less View transaction list View journal entry worksheet No Date General Journal Debit Credit 1 January 02, 2022 Fair value adjustment Gain on investment (unrealized, OCI) 2 January 02, 2022 Reclassification adjustment (OCI) Fair value adjustment 3 January 02, 2022 Cash Gain on investment (unrealized, OCI) Premium on bond investment Investment in bonds
