Question

Homework - Chapter 12 Helps Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion 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 million. points 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. Prepare any additional journal entry necessary for Tanner-UNF to 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 $190 million. Prepare the journal entries required on the date of sale. Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 and 2 Reg 3 Reg4 Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet. (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, (le, 5,500,000 should be entered as 5.5)) NO General Journal Debit Credit Date 1 December 31, 202 Fair value adjustment Gain on Investment (unrealized, NI)

could you plz help me with 4 rquired?

Answer 1

Questioon 12: Tanner-UNF Working Notes: Amortization table using effective interest method Semiannual Interest Period Semiannual Semiannual Carrying Value Interest Expense Interest at beginning of at 4% to payment to period berecorded bondholders 4% of A 3% of $240 milion Carrying Amortization Unamortized Value at of Bond Bond Discount end of Discount at end of Period period (B-C) (E-D) (A+D) $ 40.00 $ 200.00 $ 0.80 $ 39.20 $ 200.80 $ 0.83$ 38.37$ 201.63 31-Dec-21 $ 30-Jun-22 $ 200.00 $ 200.80 $ 8.00 $ 8.03 $ 7.20 7.20 Compute the discount amount on bonds : Discount = face amount of bonds - Actual price paid for bonds = $240 miilion - 200 = $40 million

Event 1 Date 1-Jul-21 Journal Entries - Tanner - UNF Corporation Particulars Debit (In Million) Credit (in Million) Investment in Bond Dr $240.0 To Cash $200.0 To Discount on bond investment $40.0 (Being investment in bond recorded) 2 31-Dec-21 Cash Dr ($240 x 6%x 6/12) Discount on bond investment Dr To Interest revenue ($200*8%*6/12) $7.2 $0.8 (Being revenue recoginition for bond interest and discount amortized) Requirement 3 3 31-Dec-21 |Fair value adjustment Dr ($210 - $200 - $0.80) $9.2 To Net unrealized holding gain or loss (Being adjusting entry to record investment at fair value) [Note : see the above table, where at the end of dec31,2021 carrying value of the bond is $200.8 Therefore, $210-200.8 = $9.2]

Requirement 4: | 1 2 -Jan-22 $20.0 Unrealized holding gain or loss Dr (210-190) To Fair value adjustment (To record fair value adjustment) $20.0 2 2 -Jan-22 Cash Dr Discount on bond investment Dr ($40-$0.80) Fair Value adjustment Dr($20 -9.2] To Investment in Bond (To record sale of investment) $190.0 $39.2 $10.8 $240.0