Question

Only requirement 4 and 5

Fuzzy Monkey Technologies, Inc., purchased as a longterm investment $60 million of 6% bonds. dated January 1 on January 1. 2018. Management has the positive intent and ability to hold the bond until maturity. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $46 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. 2018, was $50 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effecti rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31. 2018, balance sheet? 5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investmente Complete this question by entering your answers in the tabs below. Reg 1 to 3 Reg 4 Reg 5 At what amount will Fuzzy Monkey report its investment in the December 31. 2018, balance sheet? (Do n intermediate calculations. Enter your answer in millions rounded to 2 decimal places. (ie 5.50)) . 5.500,000 sho investm mition

Answer 1

Solution 1 to 3:

Journal Entries - Fuzzy Monkey Technologies Inc.
Event	Date	Particulars	Debit (In Million)	Credit (In Million)
1	1-Jan-18	Investment in Bond Dr	$60.00
		To Cash		$46.00
		To Discount on bond investment		$14.00
		(Being investment in bond recorded)
2	30-Jun-18	Cash Dr ($60 * 6% * 6/12)	$1.80
		Discount on bond investment Dr	$0.04
		To Interest revenue ($46*8%*6/12)		$1.84
		(Being revenue recoginition for bond interest and discount amortized)
3	31-Dec-18	Cash Dr ($60 * 6% * 6/12)	$1.80
		Discount on bond investment Dr	$0.04
		To Interest revenue ($46.04*8%*6/12)		$1.84
		(Being revenue recoginition for bond interest and discount amortized)

Solution 4:

Fuzzy monkey will report its investment in balance sheet at amortized cost i.e. = $46.08 million

Solution 5:

Statement of cash flows (Partial) For 2018
Particulars	Amount (In million)
Cash flow from operating activities:
Interest revenue	$3.60
Cash flow from investing activities:
Cash paid for purchase of investment	-$46.00