Problem 12 - 1 (Algo) Securities held - to - maturity; bond investment; effective interest; financial statement effects [LO12 - 1, 12-2] Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment $ 200 million of 10% bonds, dated January 1, on January 1, 2024. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $178 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 $190 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2024 balance sheet? 5. How would Fuzzy Monkey's 2024 statement of cash flows be affected by this investment?
Problem 12 - 1 (Algo) Securities held - to - maturity; bond investment; effective interest; financial statement effects [LO12 - 1, 12-2] Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment $ 200 million of 10% bonds, dated January 1, on January 1, 2024. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $178 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 $190 million. Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2024 balance sheet? 5. How would Fuzzy Monkey's 2024 statement of cash flows be affected by this investment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 12 - 1 (Algo) Securities held - to - maturity; bond investment; effective interest; financial statement
effects [LO12-1, 12-2] Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment S
200 million of 10% bonds, dated January 1, on January 1, 2024. Management has the positive intent and
ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The
price paid for the bonds was $178 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 $190 million.
Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the
effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2024
balance sheet? 5. How would Fuzzy Monkey's 2024 statement of cash flows be affected by this investment?
(If more than one approach is possible, indicate the one that is most likely.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2f2d8308-4617-4f9f-b9aa-7267aedefe16%2F8dfeeb1d-5bba-4c33-ad2c-9b39b9ee3504%2F8bpld3c_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 12 - 1 (Algo) Securities held - to - maturity; bond investment; effective interest; financial statement
effects [LO12-1, 12-2] Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment S
200 million of 10% bonds, dated January 1, on January 1, 2024. Management has the positive intent and
ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The
price paid for the bonds was $178 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 $190 million.
Required: 1. to 3. Prepare the relevant journal entries on the respective dates (record the interest at the
effective rate). 4. At what amount will Fuzzy Monkey report its investment in the December 31, 2024
balance sheet? 5. How would Fuzzy Monkey's 2024 statement of cash flows be affected by this investment?
(If more than one approach is possible, indicate the one that is most likely.)
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