ezto.mheducation.com/hm.tpx Tanner UNF Corporation acquired as a long-term inves

Question

ezto.mheducation.com/hm.tpx Tanner UNF Corporation acquired as a long-term investment $200 million of 6.0% bonds, dated July 1, on July 1, 2016. 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 $170 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, 2016 was $180.0 million. Required 1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2016 and interest on December 31, 2016, at the effective (market) rate. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).) View transaction list Journal entry worksheet 2 Record Tanner-UNF's investment in the bonds on July 1, 2016. Note: Enter debits before credits Event General Journal Debit Credit Type here to search

Explanation / Answer

Requirement 1 Journal Entry Date General Journal Debit Credit 1-Jul Investment in bonds $           200.00 Discount on bonds investment $                 30.00 Cash $               170.00 (To record investment in bonds on discount) Requirement 2 Date General Journal Debit Credit 31-Dec Cash $             12.00 ($200 million *6%) Discount on bonds investment $               1.60 (13.6-12) Interest Revenue $                 13.60 ($170 million *8%) (To record semi-annual interest received)

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