Question

Only need the answers for fhe second journal entry on number 4.

Tanner-UNF Corporation acquired as a long-term investment $300 million of 6% bonds, dated July 1, on July 1, 2018. The market Interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $250 million for the bonds. The company will receive interest 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 $260 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 $240 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. Reg 1 and 2 Req3 Reg 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 $240 million. Prepare the journal entries necessary to record the sale, including updating the fair value adjustment, recording any reclassification adjustment, and recording the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account feld. Enter your answers in millions rounded to I decimal place, (i.., 5,500,000 should be entered as 5.5).) Show less View transaction list

Answer 1

Answer-4:

Date Cash Received (300 x 6% x 1/2) Interest revenue (in million) Bond discount Carrying amount amortization of bonds 250 251 Jul.01, 2018 Dec.31, 2018

Amortized cost of the bond as on Dec 31, 2018   $251 million

Less: Fair value of the bond                                  $240 million

         Unrealized loss                                              $11 million

(in million) Debit ($) Credit ($) General Journal Date Account Name Reclassification adjustment-OCI Fair value adjustment Dec.31, 2018 |(to report unrealized holding loss as an adjustment of fair value) 11 Cash Loss on sale of bond Bond investment Jan 02, 2019 (to remove cost in available for sale securities) Fair value adjustment Reclassification adjustment-OCI Jan.02, 2019 (to remove securities fair value adjustment account on sale)