Question

apter 12 HW Problems 6 Help S 3 Exercise 12-5 Trading securities [L012-2] as a long-term interest rate (yield) was 9% for bonds of similar risk and maturity. TannerUNF paid $200 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 $210 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 e e (market) rate. 3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet. 4. Su ferences Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2019, for $190 million. Prepare the journal entries to record the sale. Complete this question by entering your answers in the tabs below. Req 1 and 2 Req 3 Req 4 Tanner-UNF's investment in the bonds on July 1, 2018 and interest on December 31, 2018, at the Prepare the journal entry to 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, (.e.,5,500,000 should be entered as 5.5).) Journal entry worksheet < Prey 30f 10 Next

Answer 1

Solution 1&2:

Journal Entries - Tanner - UNF Corporation
Event	Date	Particulars	Debit (In Million)	Credit (In Million)
1	1-Jul-18	Investment in Bond Dr	$240.00
		To Cash		$200.00
		To Discount on bond investment		$40.00
		(Being investment in bond recorded)
2	31-Dec-18	Cash Dr ($240 * 7% * 6/12)	$8.40
		Discount on bond investment Dr	$0.60
		To Interest revenue ($200*9%*6/12)		$9.00
		(Being revenue recoginition for bond interest and discount amortized)

Solution 3:

Journal Entries - Tanner - UNF Corporation
Event	Date	Particulars	Debit (In Million)	Credit (In Million)
1	31-Dec-18	Fair value adjustment Dr ($210 - $200 - $0.60)	$9.40
		To Unrealized holding gain or loss - NI		$9.40
		(Being adjusting entry to record investment at fair value)

solution 4:

Journal Entries - Tanner UNF Corportation
Event	Date	Particulars	Debit (In Million)	Credit (In Million)
1	2-Jan-19	Unrealized holding gain or loss - NI Dr	$9.40
		To Fair value adjustment		$9.40
		(Being reversal of fair value adjustment at the time of sale)
2	2-Jan-19	Cash Dr	$190.00
		Discount on bond investment Dr	$39.40
		Loss on sale of investment Dr	$10.60
		To Investment in Bond		$240.00
		(To record sale of investment)