Prepare the relevant journal entries on the respective dates

Reference no: EM132731863

Question - 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 -

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, 2018, balance sheet?

4-b. Prepare any entry necessary to achieve this reporting objective.

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

Record any necessary entry to report the investment at the correct value on the balance sheet.

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

Reference no: EM132731863

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