Problem 12-2 (Algo) Trading securities; bond investment; effective interest [LO12-1, 12-3] Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $80 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 $64 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 $70 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.) Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Req 1 to 3 Reg 4A Reg 4B Reg 5 Req 1 to 3 Reg 4A Reg 4B Reg 5 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).) No Credit Debit 80.00 1 Date General Journal January 01, 2021 Investment in bonds Cash Discount on bond investment 64.00 16.00 2 2 June 30, 2021 Cash Discount on bond investment Interest revenue 2.40 0.16 2.56 3 2.40 December 31, 202 Cash Discount on bond investment Interest revenue 0.17 2.57 Prepare any 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).) No Debit Credit 1 Date General Journal December 31, 2021 Fair value adjustment Gain on investments (unrealized, NI) 5.67 5.67 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 i decimal place, (i.e., 5,500,000 should be entered as 5.5).) $ Operating cash flow Investing cash flow 68.8 0.0 million million outflow no effect $
