Ch 12 Required Assignm x C Acccunting question I Chx C Secure! https://newcornec
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Question
Ch 12 Required Assignm x C Acccunting question I Chx C Secure! https://newcornect.mheducation.co Ch 12 Required Assignments Help Save & Exit Submit Check my work 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 lor lhe bonds was $66 million. Inlerest is received semiannually on June 30 and December 31, Due lo changing market conditions, the fair value of the bonds at December 31, 2018, was $70 million. 2 points Required: 1-to 3. Prepare the relevant lournal 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, 2018, balance sheet? 5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment? Skippad eBook Complete this question by entering your answers in the tabs below References Req 1 to3 Req 4 prepare the relevant iournal entries on the respective dates (record the interest at the effective rate).(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places, (ie, 5,500,000 should be entered as 5.50).) View transaction list Journal entry worksheet Record Fuzzy Monkey's Investment on bonds on January 1, 2018. 3:44 PM O Type here to searchExplanation / Answer
1. to 3.
The following journal entries will be prepared during 2018 in respect of the investment in bonds:
4.
Since the company has the intent and capability to hold the bonds till maturity, the investment will be classified as held to maturity investment and will be reported in the company's balance at its book value.
Therefore,
Amount at which the investment will be reported in the balance sheet = $66,000,000 + $100,000 + $105,000 = $66,205,000
5.
The investing activities section of the statement of cash flows will report a decrease in cash for $66,000,000 for investments made and the same section will report an increase in cash for $205,000 for interest received on investments.
Therefore, there will be a net decrease in cash from investing activities for $66,000,000 - $205,000 = $65,795,000.
Date Account Titles and Explanation Debit Credit Jan. 1, 2018 Debt Investments - Held to Maturity 66000000 Cash 66000000 (To record investment in bonds.) Jun. 30, 2018 Cash ($80,000,000 × 8% × 1/2) 3200000 Debt Investments - Held to Maturity ($3,300,000 - $3,200,000) 100000 Interest Revenue ($66,000,000 × 10% × 1/2) 3300000 Dec. 31, 2018 Cash ($80,000,000 × 8% × 1/2) 3200000 Debt Investments - Held to Maturity ($3,305,000 - $3,200,000) 105000 Interest Revenue ($66,100,000 × 10% × 1/2) 3305000