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Adekunle John AutoSave CH H File Home Insert - 0 x Comments Share U Draw Design Layout References Mailings Times New Roman .14 . A A Aa AO BIU.ab X, X ADA Review E C Xcut View Help Grammarly Search EE211 AaBbc AalbCol AaBb C AaBbccc AaB 1 . . 1 Normal 1 No Spac... Heading 1 Heading 2 Title Find - Replace Select Paste Dictate Lith copy Format Painter Clipboard - Open Grammarly Font Paragraph Styles Editing Voice Grammarly Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $140 million of 10% bonds, dated January 1, on January 1, 2021. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was S124 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 S130 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). Record Fuzzy Monkey's investment on bonds on January 1, 2021. Record the interest revenue on June 30, 2021. Record the interest revenue on December 31, 2021. 4 a. At what amount will Fuzzy Monkey report its investment in the December 31, 2021, balance sheet? (Do not round intermediate calculations. Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) (Record any necessary entry to report the investment at the correct value on the balance sheet.) 4-b. Prepare the entry necessary to achieve this reporting objective for December 31, 2021 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.) Operating Cash flow Million Inflow/outflow/no effect Inflow/outflow/no effect Investing Cashflow Million + 80% 8:56 AM 0 234 words * 1/22/2020 Type here to search

Answer 1

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Part 1-3
Date	Account	Debit	Credit
Jan1 2021	Investment in Bond	$                          140.00
	Discount on investment bonds		$     16.00
	Cash		$   124.00
Jun 30 2021	Cash ($140*5%)	$                               7.00
	Discount on bond investment	$                               0.44
	Interest Revenue ($124*6%)		$        7.44
Dec 31 2021	Cash ($140*5%)	$                               7.00
	Discount on bond investment	$                               0.47
	Interest Revenue ($124+$0.44)*6%		$        7.47
Part 4a	At Farir Value (As AFS)	$                          130.00
Part 4b	Fair Value Adjustment	$                               5.09
	Unrealized Holding Gain (NI)		$        5.09
	($130 m Fair Value-$124.91 Amortized)
	Investment in Bond		$   140.00
	Less: Unamortized discount on bond		$   (15.09)
	($16-$0.44-$0.47)
	Amortized cost of		$   124.91
Part 5	Operating Activities ($7+$7)	Interest Revenue	$     14.00	Cash Inflow
	Investing Activities	Purchase	$   124.00	Cash Outflow