Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $ 160 million of 8% bonds, dated January 1, on January
1, 2018. Management intends to have the investment available for
sale when circumstances warrant. For bonds of similar risk and
maturity the market yield was 10%. The price paid for the bonds was
$142 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 $150 million.
Required:
1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).
4-a. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?
4-b. Prepare the entry necessary to achieve this reporting objective.
5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?
Required:
1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).
4-a. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?
4-b. Prepare the entry necessary to achieve this reporting objective.
5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?
