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Prepare the relevant journal entries on the respective dates

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Reference no: EM132686137

Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $80 million of 6% 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 8%. The price paid for the bonds was $64 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 $70 million.

Required:

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

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

Question 3: Prepare entry necessary to achieve this reporting objective.

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

Reference no: EM132686137

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