milar risk and maturity. Tanner-UNF paid $200 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, 2021, was $210 million. 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, 2021, at the effective (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021, balance sheet.
Tanner-UNF Corporation acquired as a long-term investment $240 million of 8% bonds, dated July 1, on July 1, 2021. Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 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
Required:
1. & 2. Prepare the
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2021,
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 $180 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.
Record Tanner-UNF’s investment in the bonds on July 1, 2021.
Record interest on December 31, 2021.
Record the entry for fair value adjustment.
Record the entry for fair-value adjustment, AFS investment.
Record the entry for reclassification adjustment.
Record the sale of the investment by Tanner-UNF.
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