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Exercise 1 2 - 5 ( Algo ) Trading securities [ LO 1 2 - 1 , 1 2 - 3 ] Tanner - UNF

Exercise 12-5(Algo) Trading securities [LO12-1,12-3]
Tanner-UNF Corporation acquired as an investment $250 million of 8% bonds, dated July 1, on July 1,2024. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $210 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 31,2024, was $220 million.
Required:
1. & 2. Prepare the journal entry to record Tanner-UNFs investment in the bonds on July 1,2024 and interest on December 31,2024, at the effective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31,2024, balance sheet.
4. Suppose Moodys bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2,2025, for $200 million. Prepare the journal entries required on the date of sale.

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