Mills Corporation acquired as an investment $240 million of 8% bonds, dated July 1, on July...

Mills Corporation acquired as an investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 6% 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, 2021, was $265 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. Prepare the journal entry by Mills to record any fair value adjustment necessary for the year ended December 31, 2021.
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 $292 million. Prepare the journal entries required on the date of sale.

Solutions

Expert Solution

Mills Corporation acquired as an investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

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...

Tanner-UNF Corporation acquired as an investment $240 million of 8% bonds, dated July 1, on July...

Tanner-UNF Corporation acquired as an investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 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 $210...

Mills Corporation acquired as a long-term investment $225 million of 8% bonds, dated July 1, on...

Mills Corporation acquired as a long-term investment $225 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 $250 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 $270 million of 8% bonds, dated July 1, on...

Mills Corporation acquired as a long-term investment $270 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 $310 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 $225 million of 8% bonds, dated July 1, on...

Mills Corporation acquired as a long-term investment $225 million of 8% 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 6% for bonds of similar risk and maturity. Mills paid $250 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 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...

Tanner-UNF Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on...

Tanner-UNF Corporation acquired as a long-term investment $240 million of 8% 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 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 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 $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...

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...

Subjects