Fuzzy Monkey Technologies purchased $200 million of 10% bonds on January 1, 2024, for $178 million as a short-term investment, intending to include it in an active trading portfolio. By December 31, 2024, the fair value of the bonds increased to $190 million, reflecting changing market conditions. The document outlines the necessary journal entries and financial statement impacts related to this investment.

1. Fuzzy Monkey Technologies, Incorporated purchased as a short-term investment $200 million of
10% bonds, dated January 1, on January 1, 2024. Management intends to include the investment
in a short-term, active trading portfolio. 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, 2024, was $190 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, 2024 balance
sheet?
4-b. Prepare any entry necessary to achieve this reporting objective.
5. How would Fuzzy Monkey's 2024 statement of cash flows be affected by this investment? (If
more than one approach is possible, indicate the one that is most likely.)