Here is my problem can anyone show me how to solve each one step by step. thanks

Question

Here is my problem can anyone show me how to solve each one step by step. thanks

Problem 12-1 Securities held-to-maturity; bond investment; effective interest [LO12-1]

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $190 million of 8% bonds, dated January 1, on January 1, 2013. 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 $169 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, 2013, was $180 million.

Prepare the journal entry to record Fuzzy Monkey’s investment on January 1, 2013. (Enter your answers in millions.)

Prepare the journal entry by Fuzzy Monkey to record interest on June 30, 2013 (at the effective rate). (Do not round your intermediate calculations. Enter your answers in millions rounded to 2 decimal places.)

Prepare the journal entry by Fuzzy Monkey to record interest on December 31, 2013 (at the effective rate). (Do not round your intermediate calculations. Enter your answers in millions rounded to 2 decimal places.)

At what amount will Fuzzy Monkey report its investment in the December 31, 2013, balance sheet? (Do not round your intermediate calculations. Enter your answers in millions rounded to 2 decimal places.)

How would Fuzzy Monkey's 2013 statement of cash flows be affected by this investment? (Do not round your intermediate calculations. Enter your answers in millions rounded to 1 decimal place. Input all amounts as positive values.)

$ (Click to select)outflowinflow

Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $190 million of 8% bonds, dated January 1, on January 1, 2013. 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 $169 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, 2013, was $180 million.

Explanation / Answer

1) Journal Entry (Amounts in million $)

2)   Journal Entry (Amounts in million $)

3) Journal Entry (Amounts in million $)

4) Fuzzy Monkey will report its investment at its fair value (i.e. $180 million) on December 31, 2013 in the December 31, 2013 balance Sheet. Therefore Fuzzy Monkey will report its investment in the December 31, 2013, balance sheet at $180 million.

Investments $180 million

5) Operating Cash Flow = ($7.60+$7.60) million = $15.20 million (interest received in cash) Cash inflow

Investing Cash Flow = $169 million Cash outflow

Date General Journal Debit Credit Jan 1, 2013 Investment in Bonds 190 Discount on bond investment ($190-$169) 21 Cash 169

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