In: Accounting
Manitoba Ltd. Purchased 1,000 shares of Spectrum Company for $20
per share on January 1, Year 1. Manitoba chose to classify this
equity investment as FVOCI. On December 31, Year 1, the market
price of Spectrum's stock was $23. On March 1, Year 2, all 1,000
shares of Spectrums stock were sold for $24 per share.
Under IFRS, on December 31, Year 1, the journal entry for this
equity investment would include:
a) A credit to other comprehensive income for $3,000
b)A credit to Unrealized Gains for $3,000
c) A debit to other comprehensive income for $3,000
d) A credit to other comprehensive income for $1000
Under IFRS, ON March 1, Year 2, the journal entry for the sale
of this equity investment would include:
a)A debit to other comprehensive income for $1000
b)A credit to gains on sale of equity investment for $4,000
c)A credit to other comprehensive income for $1,000
d) A credit to gains on sale of equity investment for $1,000
Ans 1(a) A credit to other comprehensive income for $3,000
As per IFRS 9 (Financial Instruments), Journal entry for the change in fair value of financial asset classified under FVOCI category at Balance sheet date would be as follows:
Date | Particulars | Debit | Credit |
12/31 Year1 |
Investment in Spectrum Co.(Financial Assets) A/c Dr (Now Investment are carried at $23 Per share in Balance Sheet) |
$3,000 | |
To Other Comprehensive Income A/c (1000 Shares*$3($23-$20)) | $3,000 |
Ans 2 (c) A credit to other comprehensive income for $1,000
As per IFRS 9 (Financial Instruments), Journal entry for the change in fair value at the time of disposal of finanicial asset classified under FVOCI category would be as follows:
Date | Particulars | Debit | Credit |
03/01 Year 2 |
Investment in Spectrum Co.(Financial Assets) A/c Dr | $1,000 | |
To Other Comprehensive Income A/c (1000 Shares*$1($24-$23)) | $1,000 |