Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tanner-UNF Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on July 1, 2018. The market Interest rate (yield) was

image text in transcribed
Tanner-UNF Corporation acquired as a long-term investment $260 million of 6% bonds, dated July 1, on July 1, 2018. The market Interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $220 million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available for sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $230 million Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2018 and interest on December 31, 2018. at the effective (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018. balance sheet 4. 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 $200 million. Prepare the journal entries necessary to record the sale, including updating the fair value adjustment, recording any reclassification adjustment, and recording the sale. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 and 2 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 $200 million. Prepare the journal entries necessary to record the sale, including updating the fair value adjustment, recording any reclassification adjustment, and recording 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, (le, 5,500,000 should be entered as 5.5).) Show less Event General Journal Debit Credit Cash Fair value adjustment 2000 210

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Are You Legal A Personal Legal Audit And Empowerment Tool

Authors: Nelson P. Miller

1st Edition

099055533X, 978-0990555339

More Books

Students also viewed these Accounting questions