Tanner-UNF Corporation acquired as a long-term investment $160 million of 5% bonds, dated July 1, on...
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Tanner-UNF Corporation acquired as a long-term investment $160 million of 5% 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 8% for bonds of similar risk and maturity. Tanner-UNF paid $130 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 $140 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 $110 million. Prepare the journal entry to record the sale. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Req 6 How would this investment be classified on Tanner-UNF's balance sheet? Classification < Req 1 Req 2 to 4 > Journal entry worksheet < 1 2 3 Record Tanner-UNF's investment in the bonds on July 1, 2018. Note: Enter debits before credits. Event 1 General Journal Debit Credit Record entry Clear entry View general journal < Req 1 Req 5 Journal entry worksheet 1 2 3 Record interest on December 31, 2018, at the effective (market) rate. Note: Enter debits before credits. Event 2 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 3 Record the entry to recognize fair value changes as of December 31, 2018. Note: Enter debits before credits. Event 3 General Journal Debit Credit Record entry Clear entry View general journal > Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Req 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 million < Req 2 to 4 Req 6 > Journal entry worksheet < 1 2 Record the entry to adjust to fair value on the date of sale. Note: Enter debits before credits. Event 1 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 Record the sale of the bonds on January 2, 2019. Note: Enter debits before credits. Event 2 General Journal Debit Credit Record entry Clear entry View general journal Tanner-UNF Corporation acquired as a long-term investment $160 million of 5% 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 8% for bonds of similar risk and maturity. Tanner-UNF paid $130 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 $140 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 $110 million. Prepare the journal entry to record the sale. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Req 6 How would this investment be classified on Tanner-UNF's balance sheet? Classification < Req 1 Req 2 to 4 > Journal entry worksheet < 1 2 3 Record Tanner-UNF's investment in the bonds on July 1, 2018. Note: Enter debits before credits. Event 1 General Journal Debit Credit Record entry Clear entry View general journal < Req 1 Req 5 Journal entry worksheet 1 2 3 Record interest on December 31, 2018, at the effective (market) rate. Note: Enter debits before credits. Event 2 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 3 Record the entry to recognize fair value changes as of December 31, 2018. Note: Enter debits before credits. Event 3 General Journal Debit Credit Record entry Clear entry View general journal > Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Req 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 million < Req 2 to 4 Req 6 > Journal entry worksheet < 1 2 Record the entry to adjust to fair value on the date of sale. Note: Enter debits before credits. Event 1 General Journal Debit Credit Record entry Clear entry View general journal Journal entry worksheet < 1 2 Record the sale of the bonds on January 2, 2019. Note: Enter debits before credits. Event 2 General Journal Debit Credit Record entry Clear entry View general journal
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Answer rating: 100% (QA)
1 Classification on Balance Sheet TannerUNF would classify this investment as a LongTerm Investment under the Fair Value Option on its balance sheet This means the investment will be reported at fair ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
Posted Date:
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