CHAPTER TWE/XVG Tanner-UNF C/XYo Tanner-UNFCc ×\"d3Cash 3 310m xte mahams × Tann
ID: 2430003 • Letter: C
Question
CHAPTER TWE/XVG Tanner-UNF C/XYo Tanner-UNFCc ×"d3Cash 3 310m xte mahams × Tanner-UNFC xvd. cash 3 310m x https://newconnect.mheducation.com/flow/connect.html LVE HW Saved Help Save & Ch Tanner-UNF Corporation acquired as a long-term investment S240 millon of 6% bonds, dated July 1, on July 1, 2018, The market interest rate lyield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid S200 million for the bonds. The company receive interest semiannually on June 30 and December 31. Company management has classified the bonds as evailable-for-sale investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was S210 million Required 1. & 2 Prepare the journaentry to record Tanner-UNF's investmert in the bonds on July 1 2018 and interest on December 31, 2018 af the effective (markey rate 3. Prepare any additionai journai entry necessery for Tanner-UNF to report its investment in the December 31 2018, baiance sheet 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonas motivating Tannen UNE to sell the Investment on January 2 2019, for $190 milionPrepare the joumal entries necessary to record the sate ingkraing upcasing me tainzalue aojustment recoraing any reclassification ädjustment and recorcing me sale Complete this question by entering your answers in the tabs below sheetExplanation / Answer
1 & 2) Journal entries to record investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the effective (market) rate is shown as follows:-
Journal Entries (Amounts in million $)
3) Tanner UNF will report its investment in the December 31, 2018, balance sheet at its fair value i.e. $210 million. The additional required journal entry is shown as follows:-
Journal Entries (Amounts in million $)
4) Journal Entries to record the sale (Amount in million $)
Date General Journal Debit Credit July 1, 2018 Investment in Bonds 240.00 Discount on bond investment (240-200) 40.00 Cash 200.00 (To record the investment in bonds) Dec. 31, 2018 Cash (240 million*6%*6/12) 7.20 Discount on bond investment (8.00-7.20) 0.80 Interest Revenue (200 million*8%*6/12) 8.00 (To record the interest revenue)