Business, 21.04.2020 04:37 dawsoncollins4117

Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on July 1, 2018. The market interest rate (yield) was 9% for bonds of similar risk and maturity. Tanner-UNF paid $220 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 $230 million.
Required:.
1. How would this investment be classified on Tanner-UNF's balance sheet?
A. Available-for-sale securities
B. Held-to-maturity securities
C. Trading securities
D. Other securities
E. Significant-influence investments
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 $200 million. Prepare the journal entries to record the sale.

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Tanner-UNF Corporation acquired as a long-term investment $260 million of 7% bonds, dated July 1, on...

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