Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please answer 4-a. Im inputting 170,742,500 and it shows as incorrect. Problem 12-4 Fair value option; bond investment, effective interest [LO12-1,12-2, 12-3, 12-4, 12-8] Fuzzy
Please answer 4-a. Im inputting 170,742,500 and it shows as incorrect.
Problem 12-4 Fair value option; bond investment, effective interest [LO12-1,12-2, 12-3, 12-4, 12-8] Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $190 million of 8% bonds, dated January 1, on January 1, 2018 Management intends to have the investment available for sale when circumstances warrant. When the company purchased the bonds management elected to account for them under the fair value option. 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, 2018, was $180 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, 2018, balance sheet? 4-b. Prepare the journal entry necessary to achieve this reporting objective. 5. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment assuming Fuzzy anticipates holding these investments for a sufficiently long period? Complete this question by entering your answers in the tabs belowStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started