Exercise 12-5 (Static) Trading securities [LO12-1, 12-3] 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 (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. Prepare any additional journal entry necessary for Tanner-UNF to 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 entries required on the date of sale.

Complete this question by entering your answers in the tabs below.

• Req 1 and 2
• Req 3
• Req 4

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. (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).)

Journal entry worksheet

• Record Tanner-UNFs investment in the bonds on July 1, 2021.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
July 01, 2021

• Record interest on December 31, 2021.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
December 31, 2021

• Record any adjustment necessary to report the bond investment in the December 31, 2021 balance sheet.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
December 31, 2021

• Prepare any journal entry needed to adjust the investment to fair value.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
January 02, 2022

• Record the sale of the investment by Tanner-UNF.

Note: Enter debits before credits.

Date	General Journal	Debit	Credit
January 02, 2022