Question
In: Accounting
Tanner-UNF Corporation acquired as a long-term investment $300 million of 7% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $300
million of 7% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 8% for bonds of similar risk and
maturity. Tanner-UNF paid $280 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management has classified the bonds as available-for-sale
investments. As a result of changing market conditions, the fair
value of the bonds at December 31, 2018, was $285 million.
Required:
1. & 2. Prepare the journal entry to record
Tanner-UNF’s investment in the bonds on July 1, 2018 and interest
on December 31, 2018, at the effective (market) rate.
3. Prepare any additional journal entry necessary
for Tanner-UNF to report its investment in the December 31, 2018,
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, 2019, for $260 million. Prepare the
journal entries necessary to record the sale, including updating
the fair-value adjustment, recording any reclassification
adjustment, and recording the sale.
Solutions
ekkarill92 answered 9 months agoRelated Solutions
Tanner-UNF Corporation acquired as a long-term investment $300 million of 7% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $300
million of 7% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 8% for bonds of similar risk and
maturity. Tanner-UNF paid $280 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management is holding the bonds in its trading portfolio.
As a result of changing market conditions, the fair value of the
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Tanner-UNF Corporation acquired as a long-term investment $300
million of 6% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 8% for bonds of similar risk and
maturity. Tanner-UNF paid $250 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management has classified the bonds as available-for-sale
investments. As a result of changing market conditions, the fair
value of the bonds at December 31, 2018, was $260...
Tanner-UNF Corporation acquired as a long-term investment $300 million of 6% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $300
million of 6% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 8% for bonds of similar risk and
maturity. Tanner-UNF paid $250 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management has classified the bonds as available-for-sale
investments. As a result of changing market conditions, the fair
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Tanner-UNF Corporation acquired as a long-term investment $300
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management has the positive intent and ability to hold the bonds
until maturity. The market interest rate (yield) was 7% for bonds
of similar risk and maturity. Tanner-UNF paid $364 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...
Tanner-UNF Corporation acquired as a long-term investment $300 million of 10% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $300
million of 10% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 7% for bonds of similar risk and
maturity. Tanner-UNF paid $364 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management is holding the bonds in its trading portfolio.
As a result of changing market conditions, the fair value of the
bonds at December 31, 2018, was...
Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $260
million of 7% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 9% for bonds of similar risk and
maturity. Tanner-UNF paid $220 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management has classified the bonds as available-for-sale
investments. As a result of changing market conditions, the fair
value of the bonds at December 31, 2018, was $230...
Tanner-UNF Corporation acquired as a long-term investment $200 million of 7% bonds, dated July 1, on...
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interest rate (yield) was 9% for bonds of similar risk and
maturity. Tanner-UNF paid $160 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management is holding the bonds in its trading portfolio.
As a result of changing market conditions, the fair value of the
bonds at December 31, 2018, was...
Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $260
million of 7% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 9% for bonds of similar risk and
maturity. Tanner-UNF paid $220 million for the bonds. The company
will receive interest semiannually on June 30 and December 31.
Company management is holding the bonds in its trading portfolio.
As a result of changing market conditions, the fair value of the
bonds at December 31, 2018, was...
Tanner-UNF Corporation acquired as a long-term investment $230 million of 8% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $230
million of 8% bonds, dated July 1, on July 1, 2018. 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.
Company management has classified the bonds as available-for-sale
investments. As a result of changing market conditions, the fair
value of the bonds at December 31, 2018, was $220...
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