Question
Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $210 million of 6% bonds, dated January 1, on January 1, 2021. Management intends to include
Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $210 million of 6% bonds, dated January 1, on January 1, 2021. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 8%. The price paid for the bonds was $192 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, 2021, was $200 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, 2021 balance sheet? 4-b. Prepare any entry necessary to achieve this reporting objective. 5. How would Fuzzy Monkey's 2021 statement of cash flows be affected by this investment? (If more than one approach is possible, indicate the one that is most likely.) Complete this question by entering your answers in the tabs below. At what amount will Fuzzy Monkey report its investment in the December 31, 2021 balance sheet? (Do not round intermediate calculations. Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) Investment ____ million How would Fuzzy Monkey's 2021 statement of cash flows be affected by this investment? (If more than one approach is possible, indicate the one that is most likely.) (Do not round intermediate calculations. Enter all amounts as positive values. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).) Operating cash flow _____ million outflow Investing cash flow ____ million no effect
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