value 10.00 points Fuzzy Monkey Technologies, Inc., purchased as a long-term inv

Question

value 10.00 points Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 180 million of 6% bonds, dated January 1, on January 1, 2016, Management intends to have the investment available for sale when circumstances warrant. For bonds of similar risk and maturity the market yield was 8%·The price paid for the bonds was S 160 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, 2016, was $170 million. Required: 1. to 3.Prepare the relevant journal 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. Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places e.,5,500,000 should be entered as 5.50)-) view transaction list view general journal January 01, 2016 Cash June 30, 2016 Cash Interest Revenue December 31. Cash Interest Revenue 4.1 At what amount will Fuzzy Monkey repont its investment in the December 31, 2016, balanoe sheet? (Do not round intermediate calculations, Enter your answer in millions rounded to 2 decimal places, (le, 5,500,000 should be entered as 5.50).) milion 4.2 Prepare the entry necessary to achieve this reporting objective, (itf no entry is

Explanation / Answer

We will summarise as follows , since it is avaiolable for sale investment , Entries will be passed using the actual cost and further will be re adjusted to Fair values at end of each year thereby recording profits and losses on such revaluation.

Further Investment value = 180 Million, and rate of interest is 6%

we will receive 180 x 6% , =10.80 Million per year as a interest, received semianually as 10.80 x 6 /12 , = 5.40 Million per half year

part 1-3 (Amounts are in million)

4.1 Investment will appear at its fair value of 170 million in books as on 31.12.2016

4.2 Journal entry is

Invetment in Bonds (available for sale) 10 Million

To Gain on Investments in Bonds (other income) 10 Million

5 effect in operating income

Net profits xxxxx

Less: Gain on investments = 10 Million

effect in investing activities

Investment ( 160 MIllion)

Interest on investment 10.80 Million

Date Particulars Debit Credit Jan 1, 2016 Investment in Bonds ( available for sale) 160 To Cash 160 June 30 , 2016 Cash 5.40 To Interest revenue 5.40 Dec. 31 , 2016 Cash 5.40 To interest revenue 5.40

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