Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 170 milli
ID: 2582815 • Letter: F
Question
Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $ 170 million of 10% 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 12%. The price paid for the bonds was $151 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 $160 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, (i.e., 5,500,000 should be entered as 5.50).)
4.1 At what amount will Fuzzy Monkey report its investment in the December 31, 2016, balance sheet? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places, (i.e., 5,500,000 should be entered as 5.50).)
4.2 Prepare the entry necessary to achieve this reporting objective. (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).)
1 Record any necessary entry to report the investment at the correct value on the balance sheet.
How would Fuzzy Monkey's 2016 statement of cash flows be affected by this investment? (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)
5.How would Fuzzy Monkey's 2016 statement of cash flows be affected by this investment? (Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)
Record Fuzzy Monkey's investment on bonds on January 1, 2016. 1 2 Record the interest revenue on June 30, 2016. 3 Record the interest revenue on December 31, 2016
Explanation / Answer
Fuzzy Monkey Technology Inc. 1) Record fuzzy monkey's investment on bonds on january 1,2016 Particular Amount (DR) Amount (CR) Investment in Bonds $ 170.00 To Cash $ 151.00 To Discount on Bonds $ 19.00 2) Record Interest Revenue on June 30th,2016 Particular Amount (DR) Amount (CR) Cash a/c $ 8.50 Discount on Bonds Investment $ 0.56 To Interest Revenue $ 9.06 3) Record Interest Revenue on Dec 31st,2016 Particular Amount (DR) Amount (CR) Cash a/c $ 8.50 Discount on Bonds Investment $ 0.59 To Interest Revenue $ 9.09 Working Bonds Amortization Schedule Date Interest @ 5% on $170 Effective Interest@6% on Balance amount Discount Amortization Balance 1-Jan-16 $ 151.00 30/6/2016 $ 8.50 $ 9.06 $ 0.56 $ 151.56 31/12/2016 $ 8.50 $ 9.09 $ 0.59 $ 152.15 4.1) At what amount Fuzzy Monkey reports its investment in the Dec 31st,2016 Balance Sheet Bonds Investment $ 170.00 Discount on bonds $ 19.00 Less: Amortization of bonds discount on 30th june $ 0.56 Less: Amortization of bonds discount on 31st Dec $ 0.59 $ (17.85) Unamortized cost $ 152.15 Amount reported in Balance sheet= $ 152.15 4.2) Particular Amount (DR) Amount (CR) Fair Value adjustment=( Fair value-Unamortized cost)=($160-$152.15) $ 7.85 To Unrealized holding gain= $ 7.85 5) Operating Cash Flow Intt 30th june $ 8.50 Intt Dec 31st $ 8.50 $ 17.00 Investing Cash outflow $ 151.00
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