FMT Inc. purchased a long-term investment $80m of 8% bonds on Jan.1, 2011, and classified them as available for sale investment. For bonds of similar risk and maturity the yield is 10%. Interest is received on June 30 and December 31. The fair value of bonds was $70m on December 31, 2011. The bonds mature in 5 years. Bonds with the face value of $40m were sold for $42m on January 20, 2012. Required: prepare all journal entries related to the investments in bonds for the year 2011

FMT Inc. purchased a long-term investment $80m of 8% bonds on Jan.1, 2011, and classified them as available for sale investment. For bonds of similar risk and maturity the yield is 10%. Interest is received on June 30 and December 31. The fair value of bonds was $70m on December 31, 2011. The bonds mature in 5 years. Bonds with the face value of $40m were sold for $42m on January 20, 2012. Required: prepare all journal entries related to the investments in bonds for the year 2011

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment $150 million of 6% bonds, dated January 1, on January 1, 2024. Management intends to have the investment available for sale when circumstances warrant. When the company purchased the bonds, management elected to account for them under the fair value option. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $133 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, 2024, was $140 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, 2024, balance sheet? 4-b. Prepare the journal entry necessary to achieve this reporting objective. 5. How would Fuzzy Monkey’s 2024 statement of cash flows be affected by this…
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