Question

Problem 12-3 Securities available-for-sale; bond investment; effective interest [LO12-3] Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $190 million of 8% bonds, dated January 1, on January 1, 2013. 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 $169 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, 2013, was $180 million. Required: 1. Prepare the journal entry to record Fuzzy Monkey’s investment on January 1, 2013. (Enter your answers in millions.) General Journal Debit Credit 2. Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2013 (at the effective rate). (Do not round your intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) General Journal Debit Credit 3. Prepare the journal entry by Fuzzy Monkey to record interest on December 31, 2013 (at the effective rate). (Do not round your intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) General Journal Debit Credit 4-a. At what amount will Fuzzy Monkey report its investment in the December 31, 2013, balance sheet? (Do not round your intermediate calculations. Enter your answer in millions.) Investment $ million 4-b. Prepare any entry necessary to achieve this reporting objective. (Do not round your intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) General Journal Debit Credit 5. How would Fuzzy Monkey’s 2013 statement of cash flows be affected by this investment? (Do not round your intermediate calculations. Enter your answers in millions rounded to 1 decimal place. Input all amounts as positive values.) Operating cash flow $ Investing cash flow $

Answer 1