Tanner UNF Corporation acquired as a longterm investment 240

Tanner UNF Corporation acquired as a long-term investment $240 million of 7% bonds, dated July 1, on July 1, 2018. The market interest rate (yield was 9% for bonds of similar risk and maturity Tanner UNF paid $200 million for the bonds. The company will semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $210 million. Required 1. & 2. Prepare the journal entry to record Tanner-UNF\'s investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet. 4. Suppose Moody\'s bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $190 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment recording any reclassification adjustment, and recording the sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Prepare the journal entry to record Tanner-UNF\'s investment in the bonds on July 1, 2018 and interest on December 31, 201 8, at the effective (market) rate. (If no entry is required for a transaction/event, select \"No journal entry required\" in the first account field. Enter your answers in millions rounded to 1 decimal place, (L.e., 5,500,000 should be entered as 5.5).) Journal entry worksheet Record Tanner-UNF\'s investment in the bonds on July 1, 2018. earch

Solution

Answer 1 & 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1-Jul-18 Investment in Bonds      240.00 Cash      200.00 Discount on Bonds         40.00 (record the purchase of bonds) 31-Dec-18 Cash           8.40 $240 X 7% X 6/12 Discount on Bonds           0.60 Interest Revenue           9.00 $200 X 9% X 6/12 (Record the interest received) Answer 3. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 31-Dec-18 Fair Value Adjustment           9.40 $210 - ($200 + $0.60) Net Unrealized Holding Gains & Losses - I/S           9.40 (record the fair value adjustment) Answer 4. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 2-Jan-19 Cash      190.00 Discount on Bonds         39.40 $40 - $0.60 Loss on Sale of Bonds         10.60 Investment in Bonds      240.00 (Record the sale of Bonds) 2-Jan-19 Net Unrealized Holding Gains & Losses - I/S           9.40    Fair Value Adjustment           9.40