Tanner-UNF Corporation acquired as a long-term Investment $220 million of 4.0% 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. Tanner-UNF paid $180.0 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 $190.0 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2021 and Interest on December 31, 2021, at the effective (market) rate. 3. At what amount will Tanner-UNF report its Investment in the December 31, 2021, 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, 2022, for $160.0 million. Prepare the journal entry to record the sale.
Tanner-UNF Corporation acquired as a long-term Investment $220 million of 4.0% 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. Tanner-UNF paid $180.0 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 $190.0 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2021 and Interest on December 31, 2021, at the effective (market) rate. 3. At what amount will Tanner-UNF report its Investment in the December 31, 2021, 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, 2022, for $160.0 million. Prepare the journal entry to record the sale.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 7E
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![Exercise 12-1 (Algo) Securities held-to-maturity; bond investment; effective interest, discount [LO12-1]
Tanner-UNF Corporation acquired as a long-term Investment $220 million of 4.0% 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 (yleld) was 6% for bonds of
similar risk and maturity. Tanner-UNF paid $180.0 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 $190.0 million.
Required:
1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2021 and Interest on December 31, 2021, at
the effective (market) rate.
3. At what amount will Tanner-UNF report its Investment in the December 31, 2021, 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, 2022, for $160.0 million. Prepare the journal entry to record the sale.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 2021, 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
Req 3
1
Journal entry worksheet
<
2
Date
July 01, 2021
Record Tanner-UNF's investment in the bonds on July 1, 2021.
Note: Enter debits before credits.
Req 4
Record entry
General Journal
Clear entry
Debit
Credit
View general journal](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F05c29da8-5e07-472c-a295-a56e55cdcfad%2F311c2a6d-9213-4082-aa8c-4bf533b86e3d%2Fe4nrj7i_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 12-1 (Algo) Securities held-to-maturity; bond investment; effective interest, discount [LO12-1]
Tanner-UNF Corporation acquired as a long-term Investment $220 million of 4.0% 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 (yleld) was 6% for bonds of
similar risk and maturity. Tanner-UNF paid $180.0 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 $190.0 million.
Required:
1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2021 and Interest on December 31, 2021, at
the effective (market) rate.
3. At what amount will Tanner-UNF report its Investment in the December 31, 2021, 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, 2022, for $160.0 million. Prepare the journal entry to record the sale.
Complete this question by entering your answers in the tabs below.
Req 1 and 2
Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 2021, 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
Req 3
1
Journal entry worksheet
<
2
Date
July 01, 2021
Record Tanner-UNF's investment in the bonds on July 1, 2021.
Note: Enter debits before credits.
Req 4
Record entry
General Journal
Clear entry
Debit
Credit
View general journal
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