Tanner-UNF Corporation acquired as a long-term investment $230 million of 8% bon

Question

Tanner-UNF Corporation acquired as a long-term investment $230 million of 8% bonds, dated July 1, on July 1, 2018, The market : interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $210 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management is holding the bonds in its trading portfolio. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $220 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 $200 million. Prepare the journal entries to record 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, 2018, 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, (i.e., 5,500,000 should be entered as 5.5).) View transaction list

Explanation / Answer

1) Journal Entry :-

2) Journal Entry :-

3) The T-UNF report its investment in the December 31, 2018 :-

4) Journal Entry for sale including fair value adjustment ;-

Date Particulars Debit($) Credit($) July 1, 2018 Investment in Bonds A/c Dr. 230 To Discount on Bonds investment A/c 20 To Cash A/c 210 (To Record the Investment in Bond)

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