Fair value Tanner - UNF Corporation acquired as a long-term investment $240 million of 6% bonds , dated July* option; 1 , on July 1 , 2016 . Company management has the positive intent and ability to hold the bonds until held - to - maturity , but when the bonds were acquired Tanner - UNF decided to elect the fair value option for* maturity accounting for its investment . The market interest rate ( yield ) was 8% for bonds of similar risk and Investments 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 [O 12 - 2 , . 1012 - 1, value of the bonds at December 31 , 2016 , was $ 210 million . [O12 - 7\\ Required :" 1 . Would this investment be classified on Tanner - UNF's balance sheet as held - to - maturity* securities , trading securities , available- for-sale securities , significant- influence investments , or other ? Explain . 2 . Prepare the journal entry to record Tanner - UNF's investment in the bonds on July 1 , 2016 . 3 . Prepare the journal entry used by Tanner - UNF to record interest on December 31 , 2016 , at the effective ( market ) rate . 4 . Prepare any journal entry necessary to recognize fair value changes as of December 3 1 , 2016 . 5 . At what amount will Tanner - UNF report its investment in the December 31 , 2016 , balance sheet ? Why ? 6 . Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating* Tanner - UNF to sell the investment on January 2 , 2017 , for $190 million . Prepare the journal entry to record the sale