Mills Corporation acquired as a long-term investment $240 million of 6% 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 4% 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, 2018, was $270 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 Moodys bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January 2, 2019, for $290 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, (i.e., 5,500,000 should be entered as 5.5).

No	Event	General Journal		Debit		Credit
Req #4:	how to compute reclassification-OCI and fair value adjustment
1	1	Fair value adjustment, AFS investment		20
		Unrealized holding gainOCI				20
2	2	Cash		290.0
		Gain on sale of investments				11.6
		Premium on bond investment				38.4
		Investment in bonds				240.0
3	3	Reclassification adjustmentOCI		?
		Fair value adjustment, AFS investment		?