contestada

Mills Corporation acquired as a long-term investment $225 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 $250.0 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 $240.0 million.
Required:
1. 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.
2. At what amount will Mills report its investment in the December 31, 2021, balance sheet?

Respuesta :

Answer:

Dr investment in bonds  $225 million

Dr premium on bonds investment

Cr cash                                                      $250 million

Dr cash     $9,000,000

Cr interest income           7,500,000

cr bonds premium           1,500,000

Dr cash     $9,000,0000

Cr interest income            $ 7,545,000.00  

Cr bond premium             $ 1,455,000.00

Mills would report the investment at $ 246,955,000.00  

Explanation:

The journal entry to record Mill's investment is to simply debit investment accounts with cash paid for the investment and credit same amount to cash account.

The premium paid on the investment=cash paid-face value=$250 million-$225 million=$25 million

Find attache bond investment amortization schedule

Ver imagen abdulmajeedabiodunac

Otras preguntas