Question

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ent 11-1 Practice Saved Help Save & Exit Submit Check my work Tanner-UNF Corporation acquired as an investment $300 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 $250 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 $260 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. 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 $240 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 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, 2022, for $240 million. Prepare the journal entries required on the date of sale. (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).) Show less View transactions < Prev 2 of 2 Score answer >

What is the loss on investment total?

Answer 1

Hi

It is $20 as follows:

Solution: Answer is highlighted in yellow: Treated as Trading Securities: Journal entries Credit Date Jul.01 Debit 300.0 $ 2021 $ 50.0 $ 250.0 2) Cash Dec.31 2021 Account title and explaination Investment in Bonds Discount on bonds Investment (300-250) Cash (To record the investment in bonds) (300*3.0%) Discount on bonds Investment (plug) Interest Revenue (250*4%) (To record the interest revenue) Fair value Adjustment (260)- (250+1) Unrealized holding Gain - Nl or IS (To record the fair value adjustment) $ $ 9.0 1.0 $ 10.0 3) $ 9.0 Dec.31 2021 $ 9.0 $ 9.0 $ $ 20.0 (11+9) 11.0 (300-49)-240 Credit Date Jan.02 2022 Debit 20.0 $ Account title and explaination Loss on Investment (Unrealized - NI) Fair value adjustment (11+9.0) (To record the adjustment) $ 20.0 2) Credit Date Jan.02 2022 Cash Account title and explaination $ Fair value adjustment (or Realized Loss on sale of investment) $ Discount on Bonds Investment (50-1) $ Investment in Bonds (To record the sale of investment) Debit 240.0 11.0 49.0 $ 300.0