E $12-6$

$[$This is a variation of E $12-2$ focusing on trading securities$.]$

Mills Corporation acquired as a long$-$term investment $$240$ million of $6\%$ bonds, dated July $1,$ on July $1,2018.$ Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate $($yield$)$ was $4\%$ for bonds of similar risk and maturity. Mills paid $$280$ million for 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 $$270$ million.

Required:

Prepare the journal entry to record Mills' investment in the bonds on July $1,2018.$

Prepare the journal entries by Mills to record 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? Why?

Suppose Moody's bond rating agency upgraded the risk rating of the bonds, and Mills decided to sell the investment on January $2,2019,$ for $$290$ million. Prepare the journal entry to record the sale.