Find what amount will fuzzy monkey report investment

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Reference no: EM132743069

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $130 million of 8% bonds, dated January 1, on January 1, 2021. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $115 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 $120 million.

Required:

Problem 1: Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).

Problem 2: At what amount will Fuzzy Monkey report its investment in the December 31, 2021 balance sheet?

Problem 3: 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.)

Reference no: EM132743069

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