Question

company management is holding the bonds in its

Check my work 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 d was 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 milion 012 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 11, 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. $190 million Prepare the maleries required on the date of Complete this question by entering your answers in the tabs below.

Answer 1

Answer:

	Date	Account Titles	Debit ($)	Credit ($)
1	July 1, 2021	Investment in Bonds	$240
		Discount on Bonds Investment		$40
		Cash		$200
		(To record the investment in bonds)
2	Dec 31, 2021	Cash (240*6%*1/2)	$7.2
		Discount on Bonds	$0.8
		Interest Revenue ($200*8%*1/2)		$8
		(To record the interest revenue)
3	Dec 31, 2021	Fair Value Adjustment	$9.2
		Unrealized Holding Gain		$9.2
4	Jan 2, 2019	Cash	$190
		Loss on sale of investment (240-190-39.2)	$10.8
		Discount Bonds (40-0.8)	$39.2
		Investment in Bonds		$240
		(To record the sale of bonds )
	Jan 2, 2019	Unrealized holding loss (9.2+10.8)	$20
		Fir value adjustment		$20
		(To record the fair value adjustment)

Working:

3.

Fair Market Value		$210
Book Value	240
Less Discount (60-0.50)	(39.2)	200.8
Increase in value		9.2