Question
Tanner-UNF Corporation acquired as a long-term investment $360 million of 8.0% bonds, dated July 1, on...
Tanner-UNF Corporation acquired as a long-term investment $360
million of 8.0% bonds, dated July 1, on July 1, 2021. Company
management has the positive intent and ability to hold the bonds
until maturity. The market interest rate (yield) was 10% for bonds
of similar risk and maturity. Tanner-UNF paid $330.0 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 December 31, 2021, was $340.0
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, 2022, for $320.0 million. Prepare the
journal entry to record the sale.
(1) Prepare any journal entry needed to adjust the investment to
fair value.
(2) Record the sale.
Homework Answers
Answer #1
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