Question
Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on...
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 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:
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.
Journal entry worksheet
1.Record the entry to adjust the fair value.
2.Record the sale of the investment by Tanner-UNF
Note: Enter debits before credits.
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