noriega16
noriega16
30.04.2021 • 
Business

Mills Corporation acquired as a long-term investment $290 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 6% for bonds of similar risk and maturity. Mills paid $340.0 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 $330.0 million. Required:
a. 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.
b. At what amount will Mills report its investment in the December 31, 2018, balance sheet?
c. 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 $350 million. Prepare the journal entry to record the sale.

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