Tanner-UNF Corporation acquired as an investment $220 million of
6% bonds, dated July 1, on July 1, 2021. Company management is
holding the bonds in its trading portfolio. The market interest
rate (yield) was 8% for bonds of similar risk and maturity.
Tanner-UNF paid $190 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 $200 million.
Required:
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 $180 million. Prepare the
journal entries required on the date of sale.
Solution:
Journal Entries - Tanner - UNF Corporation | ||||
Event | Date | Particulars | Debit (In Million) | Credit (In Million) |
1 | 01-Jul-21 | Investment in Bond Dr | $220.00 | |
To Cash | $190.00 | |||
To Discount on bond investment | $30.00 | |||
(Being investment in bond recorded) | ||||
2 | 31-Dec-21 | Cash Dr ($220 * 6% * 6/12) | $6.60 | |
Discount on bond investment Dr | $1.00 | |||
To Interest revenue ($190*8%*6/12) | $7.60 | |||
(Being revenue recoginition for bond interest and discount amortized) | ||||
3 | 31-Dec-21 | Fair value adjustment Dr ($200 - $190 - $1.00) | $9.00 | |
To Unrealized holding gain or loss | $9.00 | |||
(Being adjusting entry to record investment at fair value) |
Solution 4:
Journal Entries - Tanner UNF Corportation | ||||
Event | Date | Particulars | Debit (In Million) | Credit (In Million) |
1 | 02-Jan-22 | Unrealized holding gain or loss Dr (200-180) | $20.00 | |
To Fair value adjustment | $20.00 | |||
(To record fair value adjustment) | ||||
2 | 02-Jan-22 | Cash Dr | $180.00 | |
Discount on bond investment Dr ($30-$1.00) | $29.00 | |||
Fair Value adjustment Dr | $11.00 | |||
To Investment in Bond | $220.00 | |||
(To record sale of investment) |
Tanner-UNF Corporation acquired as an investment $220 million of 6% bonds, dated July 1, on July...
Tanner-UNF Corporation acquired as an investment $220 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $190 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 $200...
Tanner-UNF Corporation acquired as an investment $220 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $190 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 $200...
Tanner-UNF Corporation acquired as an investment $260 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $220 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 $230...
Tanner-UNF Corporation acquired as an investment $245 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 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 $205...
Tanner-UNF Corporation acquired as an investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF pald $200 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 $210...
Tanner-UNF Corporation acquired as an investment $300 million of 7% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF 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, 2021, was $285...
Tanner-UNF Corporation acquired as an investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 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 $210...
Tanner-UNF Corporation acquired as a long-term investment $290 million of 6.0% 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 7% for bonds of similar risk and maturity. Tanner-UNF paid $260.0 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...
Tanner-UNF Corporation acquired as an investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 8% for bonds of similar risk and maturity, Tanner-UNF paid $200 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 $210...
Tanner-UNF Corporation acquired as a long-term investment $230 million of 8% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. 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. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was...