Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January1, on January 1, 2018. Management has the positive intent and ability to hold the bonds until maturity. For bondsof similar risk and maturity the market yield was 10%. The price paid for the bonds was $66 million. Interest isreceived semiannually on June 30 and December 31. Due to changing market conditions, the fair value of thebonds at December 31, 2018, was $70 million.Required:1. Prepare the journal entry to record Fuzzy Monkey’s investment on January 1, 2018.2. Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2018 (at the effective rate).3. Prepare the journal entries by Fuzzy Monkey to record interest on December 31, 2018 (at the effective rate).4. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet? Why?5. How would Fuzzy Monkey’s 2018 statement of cash flows be affected by this investment?
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $80 million of 8% bonds, dated January
1, on January 1, 2018. 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 $66 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. Prepare the
2. Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2018 (at the effective rate).
3. Prepare the journal entries by Fuzzy Monkey to record interest on December 31, 2018 (at the effective rate).
4. At what amount will Fuzzy Monkey report its investment in the December 31, 2018,
5. How would Fuzzy Monkey’s 2018 statement of
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