Question

Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completio Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $140 million of 10% bonds, dated January 1, on January 1, 2021. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $124 million. Interest is received semiannually on June 30 and December 31. Due to changing market conditions, the fair value of the bonds at December 31, 2021, was $130 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2021 balance sheet? 5. How would Fuzzy Monkey's 2021 statement of cash flows be affected by this investment? (If more than one approach is possible, indicate the one that is most likely.) Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1 to 3 Reg 4 Reg 5 Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round Intermediate calculations. Enter your answers in millions rounded to 2 decimal places, (i.e., 5,500,000 should be entered as 5.50).) No Credit Date General Journal January 01, 2021 Investment in bonds Discount on bond investment Debit 140.00 16.00 < Prey 2 of 5 Next >

Answer 1

Solution 1 to 3:

в с р Journal Entries - Fuzzy Monkey Technologies Inc. Event Date Particulars Debit (In Million) Credit (in Million) 1 $140.00 01-Jan-21 Investment in Bond Dr To Cash To Discount on bond investment (Being investment in bond recorded) $124.00 $16.00 2 $7.00 $0.44 30-Jun-21 Cash Dr ($140* 10%*6/12) Discount on bond investment Dr To Interest revenue ($124*12%*6/12) (Being revenue recoginition for bond interest and discount amortized) $7.44 3 1 31-Dec-21 Cash Dr ($140* 10%*6/12) Discount on bond investment Dr To Interest revenue [($124+044)12%*6/12] $7.00 $0.47 $7.47 (Being revenue recoginition for bond interest and discount amortized) Sheet583 (5) Sheet254 Sheet257 Sheet149 ) Sheet146 Sheet148 Sheet150

Solution 4:

Investment balance = $124 + 0.44 + 0.47 = $124.91

Solution 5:

M M N O Statement of cash flows (Partial) For 2021 Particulars Amount (In million) Cash flow from operating activities: Interest revenue ($7 + $7) $14.00 Cash flow from investing activities: Cash paid for purchase of investment -$124.00 10 11 12 14 15 16 Sheet583 (5) Sheet254 Sheet257 Sheet149 ) Sheet146 Sheet148 Sheet150 III 0 <