Tanner-UNF Corporation acquired as a long-term investment $290 million of 6% bonds, dated July 1, on July 1, 2013. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 7% for bonds of similar risk and maturity. Tanner-UNF paid $260 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, 2013 was $270 million.

Required:

1.

Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2013. (If no entry is required for an event, select "No journal entry required" in the first account field. Enter your answers in millions, (i.e., 10,000,000 should be entered as 10).)

Event	General Journal	Debit	Credit
1

2.

Prepare the journal entry by Tanner-UNF to record interest on December 31, 2013, at the effective (market) rate. (If no entry is required for an 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).)

Event	General Journal	Debit	Credit
1

3.

At what amount will Tanner-UNF report its investment in the December 31, 2013, balance sheet? (Enter your answer in millions. Round your answer to 1 decimal place.)

Investment

million

4.

Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2014, for $250 million. Prepare the journal entry to record the sale. (If no entry is required for an 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).)

Prepare the journal entry to record the sale of the investment by Tanner-UNF.

Event

General Journal

Debit

Credit

1