Exercise 12-25 Fair value option; held-to-maturity Investments [LO12-1, 12-2, 12-3, 12-8] Tanner-UNF Corporation acquired as a long-term investment $270 million of 8% bonds, dated July 1. on July 1, 2018. Company management has the positive intent and ability to hold the bonds until maturity. but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $240 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, 2018, was $250 million. Required: 1. How would this investment be classified on Tanner-UNF's balance sheet? 2. to 4. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2018. interest on December 31, 2018. at the effective rate and fair value changes as of December 31, 2018 5. At what amount will Tanner-UNF report its investment in the December 31, 2018, balance sheet? 6. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $230 million. Prepare the journal entry to record the sale. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 to 4 Reg 5 Reg 6 How would this investment be classified on Tanner-UNF's balance sheet? Classification Reg1 Reg 2 to 4 > Reg 1 Reg 2 to 4 Reg 5 Reg 6 Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2018, interest on December 31, 2018, at the effective rate and fair value changes as of December 31, 2018. (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 2 decimal places (i.e., 5,50,000 should be entered as 5.50).) Show less View transaction list Journal entry worksheet Record Tanner-UNF's investment in the bonds on July 1, 2018 Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 to 4 Reg 5 Reg 6 At what amount will Tanner-UNF report its investment in the December 31, 2018, balance sheet? (Enter your answer in millions, (i.e. 10,000,000 should be entered as 10).) Investment 1 million Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 to 4 Reg 5 Reg 6 Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $230 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 2 decimal places i.e., 5,500,000 should be entered as 5.50).) Show less View transaction list Journal entry worksheet Record the entry to adjust to fair value on the date of sale. Note: Enter debits before credits Event General Journal Debit Credit Record entry Clear entry View general journal
