Tanner-UNF Corporation acquired as a long-term investment $200 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $170 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 $180 million. Required: 1. How would this investment be classified on Tanner-UNF's balance sheet? 2. to 4. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021, interest on December 31, 2021, at the effective (market) and fair value changes as of December 31, 2021. 5. At what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet? 6. 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 $150 million. Prepare the journal entries to record the sale. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Req 6 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 $150 million. Prepare the journal entries to record the sale. (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 2 decimal places (1.e., 5,500,000 should be entered as 5.50).) Show less A
Tanner-UNF Corporation acquired as a long-term investment $200 million of 6% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $170 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 $180 million. Required: 1. How would this investment be classified on Tanner-UNF's balance sheet? 2. to 4. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021, interest on December 31, 2021, at the effective (market) and fair value changes as of December 31, 2021. 5. At what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet? 6. 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 $150 million. Prepare the journal entries to record the sale. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1 Req 2 to 4 Req 5 Req 6 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 $150 million. Prepare the journal entries to record the sale. (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 2 decimal places (1.e., 5,500,000 should be entered as 5.50).) Show less A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Tanner-UNF Corporation acquired as a long-term investment $200 million of 6% bonds, dated July 1, on July 1, 2021. Company
management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF
decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 8% for bonds of similar risk
and maturity. Tanner-UNF paid $170 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 $180 million.
Required:
1. How would this investment be classified on Tanner-UNF's balance sheet?
2. to 4. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021, interest on December 31, 2021, at
the effective (market) and fair value changes as of December 31, 2021.
5. At what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet?
6. 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 $150 million. Prepare the journal entries to record the sale.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2 to 4
Req 5
Req 6
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 $150 million. Prepare the journal entries to record the sale. (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 2
decimal places (1.e., 5,500,000 should be entered as 5.50).)
Show less A
No
Transaction
General Journal
Debit
Credit
mm
Transcribed Image Text:Answer is not complete.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2 to 4
Req 5
Req 6
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 $150 million. Prepare the journal entries to record the sale. (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 2
decimal places (i.e., 5,500,000 should be entered as 5.50).)
Show less A
No
Transaction.
General Journal
Debit
Credit
1
1
2
2
Cash
Discount on bond investment
Fair value adjustment
Investment in bonds
Req5
20.00
150.00
39.88
10.20
200.00
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