Question

Tanner-UNF Corporation acquired as a long-term investment $310 million of 6% bonds, dated July 1, on July 1, 2021. 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, 2021, was $290 million.

How would this investment be classified on Tanner-UNF's balance sheet?

A. Held-to-maturity securities
B. Other securities
C. Significant-influence investments
D. Trading securities
E. Available-for-sale securities

Answer 1

D. Trading securities

Step-by-step explanation:

Tanner-UNF Corporation

This investment would be classified on Tanner-UNF's balance sheets asTrading securities.

TRADE SECURITIES can be defined as the securities which have been purchased or bought by a company for the sole aim of realizing a short-term profit.

Hence, Companies do not always intend to keep such securities for a long period of time which is why they will only invest it if t they believe or thought they have a good chance of being compensated for the risk. they are taking which is why TRADE SECURITIES always includes both debt securities and equity securities.