Question

Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $120 million of 6% bonds, dated January 1, on January 1, 2021. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $100 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 $110 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?
4-b. Prepare any entry necessary to achieve this reporting objective.

Record any necessary entry to report the investment at the correct value on the 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.)

Req 1 to 3 Req 4A Req 4B Req 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.) (Do not round intermediate calculations. Enter all amounts as positive values. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).) Operating cash flow Investing cash flow million million < Req 4B Reg 5 >

Answer 1

Answor (1403) prepare the relevant sournal on the respective dating - the to Journal Entries - Fuzzy monkey Technologies. Inco Event Dati particulars debit Lin million) andit (inmile) Am 11.00–21 invistment in bond - $120 1 To cash To Discount on bond investment 2 20-June-al cash (120X.64 x.Colla) | $3.6 Discount on bond investment at $0.4 100x8% x (4/12) no interest revenue 3. 21-Dec-oi cach (120x6%. x (602)] $3.6 Discount on bond investment $0.416 (110040.4)*84x(6/12) To Pinterest rerencie $4,016 - 40 fuzzy mankey report its investment in the Du 31, 2021 . balance sheet at fair value i.e., & i10million.

the necessary to achieve 4B Prepare any entry necessary to an this reporting objective. Journal Entry - fussy monkey Technologies inc. Exerat. Date - Particulars. ------ 31-ble-a fair value. adjustment B160–100–0,4-046) 49.184 _ tro unrealized holding gain loss-out Debit finmille) Gamillion) $9.184 satement of cash flows (partial for all particulars Amount Cin millim 100.. L.cash flow from ofruoding activitics. short terminucstment Leçes interest icceived (3:6x2) net cash flow from operating octivities.com $92.8 wie outelow cash flow from investing activitiescom 90