Question
In: Accounting
Mills Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $260
million of 6% 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 4% for bonds
of similar risk and maturity. Mills paid $300.0 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 $280.0
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 $314 million. Prepare the journal entry to
record the sale.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Mills Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $260
million of 7% 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
5% for bonds of similar risk and maturity. Mills paid $320 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...
Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $260
million of 5% bonds, dated July 1, on July 1, 2018. Company
management is holding the bonds in its trading portfolio. 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...
Mills Corporation acquired as a long-term investment $260 million of 5% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $260
million of 5% bonds, dated July 1, on July 1, 2018. Company
management has 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 $300.0 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...
Mills Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on...
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...
Mills Corporation acquired as a long-term investment $250 million of 6% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $250
million of 6% 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 4% 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, 2021, was...
Mills Corporation acquired as a long-term investment $250 million of 6% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $250
million of 6% 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 4% 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, 2021, was...
Mills Corporation acquired as a long-term investment $300 million of 6% bonds, dated July 1, on...
Mills Corporation acquired as a long-term investment $300
million of 6% bonds, dated July 1, on July 1, 2018. Company
management is holding the bonds in its trading portfolio. The
market interest rate (yield) was 4% for bonds of similar risk and
maturity. Mills paid $350 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...
Mills Corporation acquired as an investment $260 million of 7% bonds, dated July 1, on July...
Mills Corporation acquired as an investment $260 million of 7%
bonds, dated July 1, on July 1, 2021. Company management is holding
the bonds in its trading portfolio. The market interest rate
(yield) was 5% for bonds of similar risk and maturity. Mills paid
$320 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 $300...
Mills Corporation acquired as an investment $260 million of 7% bonds, dated July 1, on July...
Mills Corporation acquired as an investment $260 million of 7%
bonds, dated July 1, on July 1, 2021. Company management is holding
the bonds in its trading portfolio. The market interest rate
(yield) was 5% for bonds of similar risk and maturity. Mills paid
$320 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 $300...
Tanner-UNF Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $260
million of 6% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 8% for bonds of similar risk and
maturity. Tanner-UNF paid $220 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management is holding the bonds in its trading portfolio.
As a result of changing market conditions, the fair value of the
bonds at December 31, 2018, was...
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