Mills Corporation acquired as a long-term investment $235 million of 8% bonds, dated July 1, on July 1, 2018. Mills determined that it should account for the bonds as an available-for-sale investment. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $270 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, 2018, was $260 million. Required: 1. & 2. Prepare the journal entry to record Mills'investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate. 3. At what amount will Mills report its investment in the December 31, 2018, 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, 2019, for $280 million. Prepare the journal entries to record the sale. Complete this question by entering your answers in the tabs below. Reg 1 and 2 Reg 3 Reg 4 Prepare the journal entry to record Mills'investment in the bonds on July 1, 2018 and interest on December 31, 2018, 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 Journal entry worksheet Record Mill's Investment in the bonds on July 1, 2018 Req 1 and 2 Reg 3 Reg 4 Prepare the journal entry to record Mills'investment in the bonds on July 1, 2018 and interest on December 31, 2018, 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 ons rounded to 1 decimal place, (1.e., 5,500,000 should be entered as 5.5).) View transaction list Journal entry worksheet Req 1 and 2 Req3 Reg 4 Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2019, for $280 million. Prepare the journal entries to record the 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, (.e., 5,500,000 should be entered as 5.5).) Show less View transaction list 1 Record the fair-value adjustment. 2 Record any reclassification adjustment. 3 Record the sale of the investment by Mills. Credit Note : = journal entry has been entered Record entry Clear entry View general journal
