Question

During 2020, Financial Holdings, a public company, purchased equity securities for trading purposes. At December 31, 2020, the securities for Financial Holdings were as follows:

Security		Quantity			Cost		Market Value
Sabo common shares		1,000			$20,000		$18,500
PYK $1.50 preferred shares		2,000			34,000		34,500
Total					$54,000		$53,000

The following transactions with respect to Financial Holdings’ investments occurred during 2021:

Jan.	15		Purchased 1,500 common shares of Hazmi for $20.00 per share. The shares are designated as fair value through other comprehensive income.
Mar.	20		Received dividends on the PYK preferred shares of $1.50 per share.
June	15		Sold 750 of the Sabo common shares for $20.75 per share.

Aug.	5		Received dividends on the Sabo common shares of $3.00 per share.
Oct.	15		Received an additional 1,500 common shares of Hazmi as a result of a 2-for-1 stock split.

At December 31, 2021, the securities held by Financial Holdings were trading on the TSX at the following prices:

Security		Price
Sabo common shares		$21.00
PYK $1.50 preferred shares		18.75
Hazmi common shares		9.50

1) Show how the securities would be reported on Financial Holdings’ December 31, 2020, balance sheet.?

2)Record Financial Holdings’ 2021 transactions and any required adjusting journal entries at December 31, 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. Round answer to 0 decimal places, e.g. 5,276.) ?

3)

Show how the investment income, gains, and losses would be reported on the statement of comprehensive income for the year ended December 31, 2021. (Ignore income tax) ?

Answer 1

Please find the attached sheets for detailed answer,

Notes-

• The Sabo Shares were carrying at loss as on 31 dec 2020 of $1500, under the financial reporting the proportional loss has to be transferred in other income, as these investment is carrried at FVTPL only for trading purpose.
• Gain on sale of investment shall be reported in statement of comprehensive income.
• Sale of investment entry has been made.

Please comment for any additional explanations,

Thanks,