Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on July 1, 2018. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 3% for bonds of similar risk and maturity. Mills paid $300 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 $280 million.

Required:

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 $315 million. Prepare the journal entries to record the sale. (Record the updating the fair-value adjustment.; Record the sale of the investment by Mills.)