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aksik [14]
3 years ago
6

Tanner-UNF Corporation acquired as a long-term investment $200 million of 6.0% bonds, dated July 1, on July 1, 2021. Company man

agement 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, 2021, was $180.0 million. Required: 1. & 2. Prepare 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. 3. At what amount will Tanner-UNF report its investment in the December 31, 2021, 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, 2022, for $150.0 million. Prepare the journal entry to record the sale.
Business
1 answer:
vivado [14]3 years ago
3 0

Answer and Explanation:

The journal entries are shown below:

On 1 Jul 2021

1.Investment in Bond $200.00  

           To Cash  $170.00

         To Discount on bond investment  $30.00

(Being the investment in the bonds is recorded)

2. On 31-Dec-21

Cash Dr ($200 × 6÷12 × 6%) $6.00  

Discount on bond investment $0.80  

          To Interest revenue ($170 × 6 ÷ 12 × 8%)  $6.80

(Being the interest is recorded)

3. On 02-Jan-22

Cash $150.00  

Discount on bond investment $29.20 ($200 - $170 - $0.80)  

Loss on sale of investment $20.80  

            To Investment in Bond  $200.00

(Being the sale is recorded)

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1 year ago
External debt A. is undesirablelong dash—only financially weak countries have it. B. is avoidablelong dash—only financially care
LuckyWell [14K]

Answer:

C. is​ ubiquitous, or omnipresent ----- all countries have it.

Explanation:

External loan -

It refers to some specific amount from the country's total debt , which comes from the foreign lenders , like international financial institutions ,  government and the commercial banks , is referred to as the external loan .

The loans need to be paid along with the interest rate .

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3 years ago
National Orthopedics Co. issued 9% bonds, dated January 1, with a face amount of $500,000 on January 1, 2021. The bonds mature o
Levart [38]

Answer:

a)

Total $483,841.9681

b)

cash                   483,842  debit

discount on BP      16,158  debit

        Bonds Payable 500,000  credit

c)

attached the schedule

d)

interest expense 24,192.1 debit

discount on BP              1,692.1 credit

cash                     22,500   credit

e)

interest expense 24276.7 debit

discount on BP                1776.7 credit

cash                       22500 credit

Explanation:

The price of the bonds is the present valeu of the maturity and coupon payment at the market rate:

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\

Coupon payment:

22,500.000 (500,000 x 9% /2 )

time 8 (4 years x 2 payment per year)

rate 0.05 (10% / 2)

22500 \times \frac{1-(1+0.05)^{-8} }{0.05} = PV\\

PV $145,422.2871

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity   500,000.00

time   8.00

rate  0.05

\frac{500000}{(1 + 0.05)^{8} } = PV  

PV   338,419.68

PV c $145,422.2871

PV m  $338,419.6810

Total $483,841.9681

We compare against face valeu to deteminate wether is premium or discount.

procceds 483,842

face value 500,000

discount on bonds payable -16,158

<u><em>As lower it is a discount.</em></u>

<u><em /></u>

For the interst we calcualte doing market rate times carrying value at the time given.

then we subtract the cash outlay and the difference is the amortization in the discounts

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1 year ago
Jenny constructed a building for use as a residential rental property. The cost of the building was $180,000, and it was placed
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Answer:

$6,545.45

Explanation:

Given that,

Cost of building = $180,000

MACRS life of building = 27.5 years

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Amount of depreciation for the building:

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= $180,000 ÷ 27.5

= $6,545.45

4 0
3 years ago
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