Please help me figure out how to calculate discount on bond investment. Prepare the journal entries by Tanner-UNF to record interest on December 31, 2021, at the effective (market) rate. 2Exercise 12-5 (Algo) Trading securities (LO12-1, 12-3]Tanner-UNF Corporation acquired as an investment $260 million of 8% bonds, dated July 1, on July 1, 2021. Company managemenholding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNFpaid $220 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changmarket conditions, the fair value of the bonds at December 31, 2021, was $230 million.ntsRequired:1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 202theffective (market) rate.3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment onJanuary 2, 2022, for $170 million. Prepare the journal entries required on the date of sale.X Answer is not complete. Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion.Return to question2Req 1 and 2Req 3Req 44Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31,2021, at the effective (market) rate. (If no entry is required for a transaction/event, select "No journal entry required" in thefirst account field. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)pointsNoDateGeneral JournalDebitCredit1July 01, 2021Investment in bonds260.0Cash220.0Discount on bond investment40.0December 31, 202 Cash10.4Discount on bond investment2.4Interest revenue8.8 XReq 1 and 2Req 3>

Answered: Exercise 12-5 (Algo) Trading securities…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Please help me figure out how to calculate discount on bond investment.

Prepare the journal entries by Tanner-UNF to record interest on December 31, 2021, at the effective (market) rate.

2
Exercise 12-5 (Algo) Trading securities (LO12-1, 12-3]
Tanner-UNF Corporation acquired as an investment $260 million of 8% bonds, dated July 1, on July 1, 2021. Company managemen
holding the bonds in its trading portfolio. The market interest rate (yield) was 10% 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. As a result of chang
market conditions, the fair value of the bonds at December 31, 2021, was $230 million.
nts
Required:
1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 202
the
ffective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, 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, 2022, for $170 million. Prepare the journal entries required on the date of sale.
X Answer is not complete.

Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion.
Return to question
2
Req 1 and 2
Req 3
Req 4
4
Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31,
2021, at the effective (market) rate. (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, (i.e., 5,500,000 should be entered as 5.5).)
points
No
Date
General Journal
Debit
Credit
1
July 01, 2021
Investment in bonds
260.0
Cash
220.0
Discount on bond investment
40.0
December 31, 202 Cash
10.4
Discount on bond investment
2.4
Interest revenue
8.8 X
Req 1 and 2
Req 3
>

Expert Solution

INTRODUCTION

BONDS ARE TYPICALLY ISSUED TO RAISE FUNDS FOR SPECIFIC PROJECTS . IN RETURN , THE BOND ISSUER PROMISES TO PAY BACK THE INVESTMENT , WITH INTEREST , OVER A CERTAIN PERIOD OF TIME .

CALCULATION OF DISCOUNT ON BOND INVESTMENT :

= INTEREST REVENUE - CASH

= (220 X 10% X 6/12 ) - (260 X 8% X6/12)

= 11 - 10.4

= 0.6

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