Tanner-UNF Corporation acquired as a long-term investment $300 million of 7% 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 $280 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 $285 million.

Required: Suppose Moodys bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $260 million.

Prepare the journal entries necessary to record the sale, including:

A.Updating the fair-value adjustment

B. Recording any reclassification adjustment

C. Recording the sale