to$-$maturity; bond

effective interest,

discount; financial

statement effects

Tanner$-$UNF Corporation acquired as a long$-$term investment $$240$ million of $6\%$ bonds, dated July $1,$ on July $1,$

Company management has the positive intent and ability to hold the bonds until maturity. The market inter$-$

est rate $($yield$)$ was $8\%$ for bonds of similar risk and maturity. Tanner$-$UNF paid $$200$ million for the bonds. The

company will receive interest semiannually on June $30$ and December $31.$ As a result of changing market condi$-$

tions, the fair value of the bonds at December $31,2024,$ was $$210$ million.

Required:

Prepare the journal entry to record Tanner$-$UNF's investment in the bonds on July $1,2024.$

Prepare the journal entries by Tanner$-$UNF to record interest on December $31,2024,$ at the effective $($market$)$ rate.

At what amount will Tanner$-$UNF report its investment in the December $31,2024,$ balance sheet? Why?

Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner$-$UNF$-$to sell

the investment on January $2,2025,$ for $$190$ million. Prepare the journal entry to record the sale.