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Prepare any entry necessary to achieve reporting objective

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Question - Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $230 million of 10% bonds, dated January 1, on January 1, 2018. Management intends to include the investment in a short-term, active trading portfolio. 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, 2018, was $220 million.

Required -

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

2. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?

3. Prepare any entry necessary to achieve this reporting objective.

4. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?

Reference no: EM132738366

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