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Prepare the relevant journal entries on the respective dates

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Question - Fuzzy Monkey Technologies, Inc., purchased as a long-term investment $200 million of 10% bonds, dated January 1, on January 1, 2016. Management has the positive intent and ability to hold the bonds until maturity. For bonds of similar risk and maturity the market yield was 12%. The price paid for the bonds was $178 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 $190 million.

Required -

1. Prepare the relevant journal entries on the respective dates (record the interest at the effective rate).

2. At what amount will Fuzzy Monkey report its investment in the December 31, 2016, balance sheet?

3. How would Fuzzy Monkey's 2016 statement of cash ?ows be affected by this investment?

 

Reference no: EM132567222

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