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Spartanburg Community College ACCOUNTING 202 Tanner-UNF Corporation acquired as a long-term investment $350 million of 7% bonds, dated July 1, on July 1, 2013

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Spartanburg Community College

ACCOUNTING 202

Tanner-UNF Corporation acquired as a long-term investment $350 million of 7% bonds, dated July 1, on July 1, 2013. 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 $320 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 $330 million.

 

1)Prepare appropriate adjusting entry(s) at December 31, 2013, assuming the fair value of the IBM common shares was:

 

 

1. $1,345,000

2. $1,790,000

3. $1,970,000