Question
Exercise 12-1 (Static) Securities held-to-maturity; bond investment; effective interest, discount [LO12-1] Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July
Exercise 12-1 (Static) Securities held-to-maturity; bond investment; effective interest, discount [LO12-1]
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity. 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. Required: 1. & 2. Prepare the journal entry to record Tanner-UNFs investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate. 3. At what amount will Tanner-UNF report its investment in the December 31, 2021, 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, 2022, for $190 million. Prepare the journal entry to record the sale.
| No | Date | General Journal | Debit | Credit |
|---|---|---|---|---|
| 1 | July 01, 2021 | Investment in bondsselected answer correct | 240.0selected answer correct | not attempted |
| Discount on bond investmentselected answer correct | not attempted | 40.0selected answer correct | ||
| Cashselected answer correct | not attempted | 200.0selected answer correct | ||
Complete this question by entering your answers in the tabs below.
- Req 1 and 2
- Req 3
- Req 4
At what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet? (Enter your answer in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)
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Suppose Moodys 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 entry to record the 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).)
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| No | Date | General Journal | Debit | Credit |
|---|---|---|---|---|
| 1 | January 02, 2022 | Investment in bondsselected answer incorrect | 190selected answer incorrect | not attempted |
| Discount on bond investmentselected answer incorrect | not attempted | 40selected answer incorrect | ||
| Cashselected answer incorrect | not attempted | 160selected answer incorrect | ||
| 2 | January 02, 2022 | Cashselected answer correct | not attempted | not attempted |
| Discount on bond investmentselected answer correct | not attempted | not attempted |
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A Textbook Of Cost And Management Accounting
Authors: M N Arora
11th Edition
9390470501, 978-9390470501
