Tanner-unf corporation acquired as a long-term investment $310 million of 6% bonds, dated july 1, on july 1, 2013. company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired tanner-unf decided to elect the fair value option for accounting for its investment. the market interest rate (yield) was 9% for bonds of similar risk and maturity. tanner-unf paid $280 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, 2013, was $290 million.
required: 1. how would this investment be classified on tanner-unf's balance sheet? held-to-maturity securities other securities significant-influence investments trading securities available-for-sale securities
2. prepare the journal entry to record tanner-unf's investment in the bonds on july 1, 2013. (if no entry is required for a particular event, select "no journal entry required" in the first account field. enter your answers in millions, (i. e., 10,000,000 should be entered as
3. prepare the journal entry used by tanner-unf to record interest on december 31, 2013, at the effective (market) rate. (if no entry is required for an event, select "no journal entry required" in the first account field. enter your answers in millions rounded to 1 decimal place, (i. e., 5,500,000 should be entered as 5.
4. prepare any journal entry necessary to recognize fair value changes as of december 31, 2013. (if no entry is required for an event, select "no journal entry required" in the first account field. enter your answers in millions rounded to 1 decimal place, (i. e., 5,500,000 should be entered as 5.
5. at what amount will tanner-unf report its investment in the december 31, 2013, balance sheet? (do not round your intermediate calculations. enter your answer in millions.) 6. prepare the 2014 adjusting journal entry assuming that tanner-unf has no other securities in this category. suppose moody's bond rating agency downgraded the risk rating of the bonds motivating tanner-unf to sell the investment on january 2, 2014, for $270 million. (if no entry is required for a particular event, select "no journal entry required" in the first account field. enter your answers in millions rounded to 1 decimal place, (i. e., 5,500,000 should be entered as 5.
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