Question
In: Accounting
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $230 million of 10% bonds, dated January...
Fuzzy Monkey Technologies, Inc., purchased as a long-term
investment $230 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
$210 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 $220 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, 2021, balance sheet?
4-b. Prepare the entry necessary to achieve this
reporting objective.
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.)
Solutions
ekkarill92 answered 10 months agoRelated Solutions
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