Business, 20.12.2019 03:31 mostman077

Tanner-unf corporation acquired as a long-term investment $240 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 $200 million for the bonds. the company will receive interest semi-annually 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.
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 $190 million. prepare the journal entries to record the sale.

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Answer from: pepsi08u29lll

Please see journal entries below

Explanation:

On July 1, 2018, Tanner-UNF acquired the bond investment

Debit: Investment in Bonds Account $200 million

Credit: Cash/Bank Account $200 million

On December 31, 2018, entries for interest received and fair value recognition are as follows (fair value recognition is necessary because the bond is held in trading portfolio):

Debit: Investment in Bonds Account $10 million (increase in fair value)

Credit: Profit/Loss Account $10 million (increase in fair value)

Debit: Cash/Bank Account $7.2 million (semi-annual interest on bond calculated as follows, 6%*240*0.5 = $7.2 million)

Credit: Profit/Loss Account $7.2 million (semi-annual interest)

On January 2, 2019, sale of bond investment

Debit: Cash/Bank Account $190 million (sales proceed)

Credit: Investment in Bonds Account $190 million (sales proceed)

Debit: Profit/Loss Account $20 million (loss on bond investment, calculated as $210 fair value less $190 million sales proceed)

Credit: Investment in Bonds Account $20 million (loss on bond investment)

Answer from: Quest

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Answer from: Quest

The answer is yes it's correct they have to guarantee that job back when they come back

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Tanner-unf corporation acquired as a long-term investment $240 million of 6% bonds, dated july 1, on...

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