Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tanner-UNF Corporation acquired as a long-term investment $360 million of 7.0% bonds, dated July 1, on July 1, 2024. Company management has the positive intent

Tanner-UNF Corporation acquired as a long-term investment $360 million of 7.0% bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $320.0 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, 2024, was $330.0 million.

Required:

1. & 2. Prepare the journal entry to record Tanner-UNFs investment in the bonds on July 1, 2024, and interest on December 31, 2024, at the effective (market) rate.

3. At what amount will Tanner-UNF report its investment in the December 31, 2024, balance sheet?

4. Suppose Moodys bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $310.0 million. Prepare the journal entry to record the sale.

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

Step: 3

blur-text-image

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

Construction Accounting And Financial Management

Authors: Steven J. Peterson

1st Edition

0131109391, 978-0131109391

More Books

Students also viewed these Accounting questions