Question

Led SUMB Oasis MPC emal ghimidd School Bills Like TITANS ats 0 Shoping Saved 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 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 $200 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 Reg 3 Req 4 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 Journal entry worksheet 1 2 Record Tanner-UNF's investment in the bonds on July 1, 2021.

Answer 1

Ans:

	Journal Entries	(Amount In Millions)
1&2	Particulars	Debit($)	Credit($)
july-1-21	Investment in Bonds A/c	260
	Discount on bond investment(260-220)		40
	Cash		220
	(To record investments in Bonds)
dec-31-21	Cash A/c ( 3 %* 260)	7.8
	Discount on bond investment (Bal Figurg	1
	Interest Revenue A/c ( 4 %* 220)		8.8
	(To record Interest)
3
	Particulars	Debit($)	Credit($)
31-12-21	Fair value adjustment(230)-(220+1)	9
	unrealized holding gain-NI Or IS		9
	(To record the fair value adjustment)
4	(260-39)-200=21	21+9
	Particulars Debit($)	Credit($)
jan-02-22	unrealized holding loss-NI	30
	Fair value adjustment(19+9)		30
	(To record the adjustment)
	Particulars	Debit($)	Credit($)
jan-02--22	Cash	200
	Fair value adjustment(260-39-200)	21
	Discount on bond investment(40-1)	39
	Investment in Bonds A/c		260
	(To record the sale)

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