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Tanner-UNF Corporation acquired as a long-term Investment $290 million of 8% bonds, dated July 1, on July 1, 2024. 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 $260 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 $270 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2024 and Interest on December 31, 2024, at the effective (market) rate. 3. Prepare any additional Journal entry necessary for Tanner-UNF to report Its Investment in the December 31, 2024, 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, 2025, for $250 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.

Tanner-UNF Corporation acquired as a long-term Investment $290 million of 8% bonds, dated July 1, on July 1, 2024. 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 $260 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 $270 million. Required: 1. & 2. Prepare the journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2024 and Interest on December 31, 2024, at the effective (market) rate. 3. Prepare any additional Journal entry necessary for Tanner-UNF to report Its Investment in the December 31, 2024, 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, 2025, for $250 million. Prepare the journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tanner-UNF Corporation acquired as a long-term Investment $290 million of 8% bonds, dated July 1, on July 1, 2024. 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 $260 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 $270 million. Required: 1. & 2. Prepare the Journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2024 and Interest on December 31, 2024, at the effective (market) rate. 3. Prepare any additional Journal entry necessary for Tanner-UNF to report Its Investment in the December 31, 2024, 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, 2025, for $250 million. Prepare the Journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Show less View transaction list < Journal entry worksheet Req 4 2 Date July 01, 2024 Record Tanner-UNF's investment in the bonds on July 1, 2024. Note: Enter debits before credits. Record entry General Journal Clear entry Debit Credit View general journal
Transcribed Image Text:Tanner-UNF Corporation acquired as a long-term Investment $290 million of 8% bonds, dated July 1, on July 1, 2024. 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 $260 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 $270 million. Required: 1. & 2. Prepare the Journal entry to record Tanner-UNF's Investment in the bonds on July 1, 2024 and Interest on December 31, 2024, at the effective (market) rate. 3. Prepare any additional Journal entry necessary for Tanner-UNF to report Its Investment in the December 31, 2024, 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, 2025, for $250 million. Prepare the Journal entries necessary to record the sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording the sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2024 and interest on December 31, 2024, at the effective (market) rate. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5). Show less View transaction list < Journal entry worksheet Req 4 2 Date July 01, 2024 Record Tanner-UNF's investment in the bonds on July 1, 2024. Note: Enter debits before credits. Record entry General Journal Clear entry Debit Credit View general journal
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