Tanner-UNF corporation acquired as a long-term investment $260 million of 5% bonds, Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 7% 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 value of the bonds at December 31, 2021, was $215 million. Required: Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivation Tanner-UNF to sell the investment on January 2, 2022, for $190 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording 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 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Journal entry worksheet Record the entry for fair-value adjustment, AFS investment.
Tanner-UNF corporation acquired as a long-term investment $260 million of 5% bonds, Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 7% 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 value of the bonds at December 31, 2021, was $215 million. Required: Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivation Tanner-UNF to sell the investment on January 2, 2022, for $190 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording 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 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Journal entry worksheet Record the entry for fair-value adjustment, AFS investment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tanner-UNF corporation acquired as a long-term investment $260 million of 5% bonds, Company management has classified the bonds as an available-for-sale investment. The market interest rate (yield) was 7% 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:
- Suppose Moody’s bond rating agency downgraded the risk rating of the bonds motivation Tanner-UNF to sell the investment on January 2, 2022, for $190 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording 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 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).
Journal entry worksheet
Record the entry for fair-value adjustment, AFS investment.
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