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Blue Spruce Corporation made the following purchases of investments during 2020, the first year in which...

Blue Spruce Corporation made the following purchases of investments during 2020, the first year in which Blue Spruce invested in equity securities:

1. On January 15, purchased 10,350 shares of Nirmala Corp.’s common shares at $38.50 per share plus commission of $2,277.
2. On April 1, purchased 5,750 shares of Oxana Corp.’s common shares at $60 per share plus commission of $3,876.
3. On September 10, purchased 8,050 shares of WTA Corp.’s preferred shares at $30.50 per share plus commission of $3,347.


On May 20, 2020, Blue Spruce sold 3,450 of the Nirmala common shares at a market price of $40 per share less brokerage commissions of $3,278. The year-end fair values per share were as follows: Nirmala $35, Oxana $63, and WTA $32. The chief accountant of Blue Spruce tells you that Blue Spruce Corporation holds these investments with the intention of selling them in order to earn short-term profits from appreciation in their prices and accounts for them using the FV-NI model.

Assume that Blue Spruce Corporation follows IFRS 9.

Blue Spruce Corporation made the following purchases of investments during 2020, the first year in which Blue Spruce invested in equity securities:

1. On January 15, purchased 10,350 shares of Nirmala Corp.’s common shares at $38.50 per share plus commission of $2,277.
2. On April 1, purchased 5,750 shares of Oxana Corp.’s common shares at $60 per share plus commission of $3,876.
3. On September 10, purchased 8,050 shares of WTA Corp.’s preferred shares at $30.50 per share plus commission of $3,347.


On May 20, 2020, Blue Spruce sold 3,450 of the Nirmala common shares at a market price of $40 per share less brokerage commissions of $3,278. The year-end fair values per share were as follows: Nirmala $35, Oxana $63, and WTA $32. The chief accountant of Blue Spruce tells you that Blue Spruce Corporation holds these investments with the intention of selling them in order to earn short-term profits from appreciation in their prices and accounts for them using the FV-NI model.

Assume that Blue Spruce Corporation follows IFRS 9.

Account Titles Debit Credit
Jan. 15 FV-NI Investments 398786
Investment Income or Loss 2277
Cash 401063
April 1. FV-NI Investments 345000
Investment Income or Loss 3876
Cash 348876
Sep. 10 FV-NI Investments 245364
Investment Income or Loss 3347
Cash 248711

Prepare the journal entry for the sale of the 3,450 Nirmala shares on May 20.

Account Titles Debit Credit
May 20. Cash 134722
FV-NI Investments 132825
Gain on Disposal of Investments - FV-NI 1897

Prepare the adjusting entry needed on December 31, 2020.

Account Titles Debit Credit
FV-NI Investments 5175
Investment Income or Loss 5175

Repeat the parts above, assuming the investments are accounted for using FV-OCI with no recycling. Blue Spruce’s policy is to capitalize transaction costs on the acquisition of FV-OCI investments and reduce the proceeds on disposal. In addition, the company reclassifies any gains or losses on disposition to Retained Earnings.

Account Titles Debit Credit
(To adjust to fair value at date of disposal) (8 entries above)
(To record disposal) (2 entries)
(To reclassify holding gain) (2 entries)
December 31, To finish everything which are 2 entries here

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ekkarill92 answered 1 year ago
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