Answer:
1. Dr Investment in bonds $260 million
Cr Discount on bond investment $40 million
Cr Cash $220 million
2. Dr Cash $7.8 million
Dr Discount on bond investment $2.1 million
Cr Interest revenue $9.9million
3. $222.1million
4. Dr Cash $210 million
Dr Discount on Bonds investment $37.9million
Dr Loss on sale of bonds $12.1 million
Cr Investment in bonds $260 million
Explanation:
1. & 2. Preparatiin of the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021 and interest on December 31, 2021, at the effective (market) rate.
1. Dr Investment in bonds $260 million
Cr Discount on bond investment $40 million
Cr Cash $220 million
(Being to record the purchase of investment )
2. Dr Cash $7.8 million
[(6%*$260)* 6 ÷ 12]
Dr Discount on bond investment $2.1 million
($9.9million-$7.8 million)
Cr Interest revenue $9.9million
[(9%*$220)* 6 ÷ 12]
(Being to record interest on bonds )
3. Calculation for what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet
Bond investment $260 million
Less Discount on bond investment ($37.9million)
($40 million - $2.1 million)
Investment cost $222.1million
Therefore the amount that Tanner-UNF will report its investment in the December 31, 2021, balance sheet is $222.1million
4. Preparation of the journal entry to record the sale.
Dr Cash $210 million
Dr Discount on Bonds investment $37.9million
($40 million - $2.1 million)
Dr Loss on sale of bonds $12.1 million
[260 million-($210 million+$37.9million)]
Cr Investment in bonds $260 million
(Being to record sale of bonds )
