Fuzzy Monkey Technologies, Inc., purchased as a short-term investment $220 million of 8% bonds, dated January 1, on January 1, 2018. Management intends to include the investment in a short-term, active trading portfolio. For bonds of similar risk and maturity the market yield was 10%. The price paid for the bonds was $201 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 $210 million.
1.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).)
a. Record Fuzzy Monkey’s investment on bonds on January 1, 2018.
b. Record the interest revenue on June 30, 2018.
c. Record the interest revenue on December 31, 2018.
2. At what amount will Fuzzy Monkey report its investment in the December 31, 2018, balance sheet?
3. Prepare any entry necessary to achieve this reporting objective.
a. Record any necessary entry to report the investment at the correct value on the balance sheet. For December 31, 2018
4. How would Fuzzy Monkey's 2018 statement of cash flows be affected by this investment?
a. Operating cash flow
b. Investing Cash flow