Exam 9: Investments

Investment in debt securities at a premium On April 1, 2020, Margarita Corp. purchased 6%, $ 120,000 (par value) bonds for $ 124,725 plus accrued interest. Interest is paid on July 1 and January 1 and the bonds mature on July 1, 2025. Margarita uses the amortized cost model to account for this investment, and intends to hold the bonds to maturity. Margarita Corp. follows ASPE. Instructions a) Prepare the journal entry to record the purchase. b) The bonds are sold on November 1, 2021 at 103 plus accrued interest. Amortization was recorded when interest was received by the straight-line method. Prepare all entries required to properly record the sale. Round values to the nearest dollar, if necessary.

Use the following information to solve the following questions: On January 1, 2020, Abalone Ltd. acquired 30% of Flounder Corp.'s common shares for $ 240,000. During 2020, Flounder reported net income of $ 100,000 and paid total dividends of $ 60,000. Abalone's 30% interest in Flounder gives Abalone the ability to exercise significant influence over their operating and financial policies. During 2021, Flounder reported net income of $ 150,000 and paid total dividends of $ 30,000 on April 1 and $ 40,000 on October 1. On July 1, 2021, Abalone sold half of its shares in Flounder for $ 158,000 cash. -Before income taxes, what income should Abalone include in its 2020 income statement as a result of this investment?

Fair value through other comprehensive income investments - entries Lekan Corp provided you with the following information about its investment in Adoweye Inc. shares purchased May 2020, and accounted for using the FV-OCI method Cost \ Fair value, December 31, 2020 Fair value, December 31, 2021 Fair value, December 31, 2022 Instructions a) Prepare the adjusting journal entries needed on December 31, 2020, 2021, and 2022. b) Determine the balance in the accumulated other comprehensive income on the statement of financial position on each of December 31, 2020, 2021, and 2022. c) Assume Lekan sold its investment in Adoweye Inc. on February 13, 2023, for $ 28,100. Prepare the journal entry(ies) needed on this date if (1) the FV-OCI method required recycling, and (2) the FV-OCI method did not require recycling.

Accumulated other comprehensive income includes

Types of companies that have investments Consider the financial statements of a publishing house, a reinsurance provider, and a charitable foundation. What types and proportions of investments would you expect to find on the financial statements of these companies?

Use the following information to solve the following questions: The summarized balance sheets of Thunder Bay Corp. and Fort William Corp. at December 31, 2020, are as follows: $\quad$$\quad$$\quad$$\quad$ THUNDER BAY CORP. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Balance Sheet $\quad$$\quad$$\quad$$\quad$$\quad$ December 31, 2020 Assets. Liabilities. \5 0,000 Common shares 200,000 Retained earnings Total equities $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ FORT WILLIAM CORP. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Balance Sheet $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ December 31, 2020 Assets FORT WILLIAM CORP. Balance Sheet December 31,2020 Assets. Liabilities Common shares. Retained earnings. Total equities. \ 75,000 185,000 -If Thunder Bay acquired a 20% interest in Fort William on December 31, 2020, for $ 65,000 and the equity method of accounting for the investment were used, the amount of the debit to Investment in Fort William Corp. would have been

Salmon Corporation purchased an investment in 2020 (an equity investment without significant influence). The purchase price of $ 94,000 included transaction costs of $ 1,000. Assuming the transaction costs were capitalized and Salmon follows IFRS, which accounting method did Salmon use to account for this investment?

Cost/amortized cost model - ASPE versus IFRS 9 When is the cost/amortized cost model used under ASPE versus IFRS 9?