FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Mills Corporation acquired as a long-term investment $240 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 $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
Required:
1. Prepare the
2. Prepare the journal entry by Mills to record interest on December 31, 2021, at the effective (market) rate.
3. At what amount will Mills report its investment in the 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 $290 million. Prepare the journal entry to record the sale.
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