Mills Corp. acquired as a long-term investment $240 million of 6% bonds, dated Jul 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 4% for bonds of similar risk and maturity. Mills paid $280 million for these bonds. The company will receive interest semiannually on June 30 and Decemeber 31. As a result of changing market conditions, the fair value of the bonds at December 31,2018, was $270 million. 1. prepare the journal entry to record Mills' investement in the bonds on July 1,2018 and record the interest on December 31,2018 at the effective (market) rate. At what amount will Mills report its investment in the December 31,2018 balance sheet? What if Mills decided to sell the investment on January 2,2019 for $290 million?
Solution 1:
Journal Entries - Mills Corporation | ||||
Event | Date | Particulars | Debit (In Million) | Credit (In Million) |
1 | 1-Jul-18 | Investment in Bond Dr | $240.00 | |
Premium on bond investment Dr | $40.00 | |||
To Cash | $280.00 | |||
(Being investment in bond recorded) | ||||
2 | 31-Dec-18 | Cash Dr ($240 * 6% * 6/12) | $7.20 | |
To Interest revenue ($280*4%*6/12) | $5.60 | |||
To Premium on bond investment | $1.60 | |||
(Being revenue recoginition for bond interest and discount amortized) |
Solution 2:
Mills report its investment in the December 31,2018 balance sheet at amortized cost = $280 - $1.60 = $278.40 million
Solution 3:
Journal Entries - Mills Corportation | ||||
Event | Date | Particulars | Debit (In Million) | Credit (In Million) |
1 | 2-Jan-19 | Cash Dr | $290.00 | |
To Investment in Bond | $240.00 | |||
To Premium on bond investment | $38.40 | |||
To Gain on sale of investment | $11.60 | |||
(To record sale of bonds) |
Mills Corp. acquired as a long-term investment $240 million of 6% bonds, dated Jul 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 $240 million of 5% 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 3% 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...
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...
Mills Corporation acquired as a long-term investment $220 million of 6% 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 4% for bonds of similar risk and maturity. Mills paid $270.0 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 $235 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 $270 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 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 $280.0 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 $270 million of 8% 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 6% for bonds of similar risk and maturity. Mills paid $310.0 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...
Question 1: Mills Corporation acquired as a long-term investment $240 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 $280.0 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...
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 $245 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 $280.0 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...