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Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1,...

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Accounting

Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1,2024. Company management has the positive intent and ability to hold the bonds until maturity. 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. As a result of changing market conditions, the fair value of the bonds at December 31,2024, was $210 million.
Required:
1. & 2. Prepare the journal entry to record Tanner-UNFs investment in the bonds on July 1,2024 and interest on December 31,2024, at the effective (market) rate.
3. At what amount will Tanner-UNF report its investment in the December 31,2024, balance sheet?
4. Suppose Moodys bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2,2025, for $190 million. Prepare the journal entry to record the sale.
The Journal Name Options are:
No journal entry required
Cash
Discount on bond investment
Gain on investments (NI)
Insurance expense
Interest receivable
Interest revenue
Investment in bonds
Loss on investments (NI)
Premium on bond investment
Retained earnings

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