Tanner-UNF Corporation acquired as an investment $250 million of 8% bonds, dated July 1, on July 1, 2021. Company management Is holding the bonds In Its trading portfolio. The market Interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $210 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 $220 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. 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 $200 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 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).)
Tanner-UNF Corporation acquired as an investment $250 million of 8% bonds, dated July 1, on July 1, 2021. Company management Is holding the bonds In Its trading portfolio. The market Interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $210 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 $220 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. 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 $200 million. Prepare the journal entries required on the date of sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 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).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![### Exercise 12-5 (Algo) Trading securities [LO12-1, 12-3]
Tanner-UNF Corporation acquired as an investment $250 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $210 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 $220 million.
#### Required:
1. **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.**
2. **Prepare any additional journal entry necessary for Tanner-UNF to report its Investment in the December 31, 2021, balance sheet.**
3. **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 $200 million. Prepare the journal entries required on the date of sale.**
Complete this question by entering your answers in the tabs below.
### Instructions:
**Req 1 and 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. (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).)
### View transaction list
#### Journal entry worksheet
**1. Record Tanner-UNF's investment in the bonds on July 1, 2021.**
**Note:** Enter debits before credits.
| Date | General Journal | Debit | Credit |
|------------|----------------------------------------------|----------|---------|
| July 01, 2021 | Purchase of Bonds \[: Description\]| \[: Amount\]| \[: Amount\]|
### Navigation Instructions:
- **Tabs:**](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F05c29da8-5e07-472c-a295-a56e55cdcfad%2Fc09c2daa-2364-4f09-9fc7-3cae3c467649%2Fi5re7e6_processed.png&w=3840&q=75)
Transcribed Image Text:### Exercise 12-5 (Algo) Trading securities [LO12-1, 12-3]
Tanner-UNF Corporation acquired as an investment $250 million of 8% bonds, dated July 1, on July 1, 2021. Company management is holding the bonds in its trading portfolio. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $210 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 $220 million.
#### Required:
1. **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.**
2. **Prepare any additional journal entry necessary for Tanner-UNF to report its Investment in the December 31, 2021, balance sheet.**
3. **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 $200 million. Prepare the journal entries required on the date of sale.**
Complete this question by entering your answers in the tabs below.
### Instructions:
**Req 1 and 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. (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).)
### View transaction list
#### Journal entry worksheet
**1. Record Tanner-UNF's investment in the bonds on July 1, 2021.**
**Note:** Enter debits before credits.
| Date | General Journal | Debit | Credit |
|------------|----------------------------------------------|----------|---------|
| July 01, 2021 | Purchase of Bonds \[: Description\]| \[: Amount\]| \[: Amount\]|
### Navigation Instructions:
- **Tabs:**
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