Answer:
A. 1-Jan-21
Dr Investment in Bond $250
Cr Cash $228
Cr Discount on bond investment $22
30-Jun-21
Dr Cash $10
Dr Discount on bond investment $1.40
Cr To Interest revenue $11.40
31-Dec-21
Dr Cash $10
Dr Discount on bond investment $1.47
Cr Interest revenue $11.47
B. $240 million
C. In Million)
31-Dec-21
Dr Fair value adjustment $9.13
Cr Unrealized holding gain or loss - NI $9.13
D. Net cash flow from operating activities= $208 Outflow
Cash flow from investing activities=$0.00
Explanation:
a. Preparation of the relevant journal entries on the respective dates.
1-Jan-21
Dr Investment in Bond $250
Cr Cash $228
Cr Discount on bond investment $22
($250-$228)
(Being to record the investment in bond )
30-Jun-21
Dr Cash $10
($250 * 8% * 6/12)
Dr Discount on bond investment $1.40
($11.40-$10)
Cr To Interest revenue $11.40
($228*10%*6/12)
(Being to record revenue recognition for bond interest and discount amortized)
31-Dec-21
Dr Cash $10
($250 * 8% * 6/12)
Dr Discount on bond investment $1.47
($11.47-$10)
Cr Interest revenue $11.47
($229.40*10%*6/12)
(Being to record revenue recognition for bond interest and discount amortized)
b. Calculation for what amount will Fuzzy Monkey report its investment in the December 31, 2016, balance sheet
Based on the information given we were told that the fair value of the bonds at December 31, 2021, was the amount of $240 million which means that the amount that Fuzzy monkey will report its investment on December 31, 2021 balance sheet will be the fair value amount of $240 million
c. Preparation of any entry necessary to achieve this reporting objective
(In Million)
31-Dec-21
Dr Fair value adjustment $9.13
($240 - $228 - $1.40 - $1.47)
Cr Unrealized holding gain or loss - NI $9.13
(Being to record adjusting entry to record investment at fair value)
d. Calculation for How would Fuzzy Monkey's 2016 statement of cash flows be affected by this investment
STATEMENT OF CASH FLOW (Partial) For 2021
(In million)
Cash flow from operating activities
Short term investment $228
Less: Interest received ($20)
Net cash flow from operating activities $208 Outflow
Cash flow from investing activities $0.00
