Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment $140 million of 10% bonds, dated January...

 

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Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment $140 million of 10% bonds, dated January 1, on January 1, 2024. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $124 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 $130 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 entry necessary to achieve this reporting objective. 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.) Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4A Req 4B Req 5 Prepare the entry necessary to achieve this reporting objective. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places, (i.e., 5,500,000 should be entered as 5.50). No Date General Journal 1 December 31, 2024 Fair value adjustment Gain on investments (unrealized, OCI) Show less Debit Credit 7.00 X 8.00 X Fuzzy Monkey Technologies, Incorporated purchased as a long-term investment $140 million of 10% bonds, dated January 1, on January 1, 2024. Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $124 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 $130 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 entry necessary to achieve this reporting objective. 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.) Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4A Req 4B Req 5 Prepare the entry necessary to achieve this reporting objective. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places, (i.e., 5,500,000 should be entered as 5.50). No Date General Journal 1 December 31, 2024 Fair value adjustment Gain on investments (unrealized, OCI) Show less Debit Credit 7.00 X 8.00 X

Answer rating: 100% (QA)

Requirements 1 to 3 Journal Entries 1 January 1 2024 Investment in Bonds Debit 124 million Cost of b... View the full answer