Grouper Inc. acquired 10% of the outstanding common shares of Gregson Inc. on December 31, 2016....

Grouper Inc. acquired 10% of the outstanding common shares of Gregson Inc. on December 31, 2016. The purchase price was $904,000 for 45,200 shares, and is equal to 10% of Gregson’s carrying amount. Gregson declared and paid a $0.80 per share cash dividend on June 15 and again on December 15, 2017. Gregson reported net income of $516,000 for 2017. The fair value of Gregson’s shares was $24 per share at December 31, 2017. Grouper is a public company and applies IFRS.

Required: a) Prepare the journal entries for Grouper for 2016 and 2017, assuming that Grouper cannot exercise significant influence over Gregson. The investment is accounted for using the FV-OCI model.

b) Prepare the journal entries for Grouper for 2016 and 2017, assuming that Grouper can exercise significant influence over Gregson.

Solutions

Expert Solution

a	Requirement

	Securities available for sale
			In the Books of Grouper Inc
			Journal entries for the yr ended 2016 and 2017
	Date	Particulars	Dr Amount	Cr Amount
	31st Dec 2016	Available for Sale	$904,000
		To Cash		$904,000
		To record the common
		stock-Gregson Inc
		Purchased

	15th June 2017	Cash (45200 shares *$.80)	$36,160
		To Revenue on Dividend		$36,160
		To record the Dividend Recd

	15th dec 2017	Cash (45200 shares *$.80)	$36,160
		To Revenue on Dividend		$36,160
		To record the Dividend Recd

	31st Dec 2017	Fair Value Adjustment A/C	$180,800		Calculation of the Unrelaized Holding Gain/Loss
		To Unrealised Holding gain(Loss)on Equity		$180,800	Fair Value	45200 shares * $24/Share
		to record the fair value of adjustment entry				$1,084,800
					Cost of Investment	$904,000
					Unrealized Gain/(Loss)	$180,800
					on investment
b	Requirement		In the Books of Grouper Inc
			Journal entries for the yr ended 2016 and 2017
	Significant influence over Gregson Inc

	31st Dec 2016	Investment in Gregson Inc A/C	$904,000
		To Cash		$904,000
		To record common stock -Gregson Inc Purchased


	15th June 2017	Cash A/C-45200 shares *$.80 /Share	$36,160
		To Investment in Gregson Inc		$36,160
		To record the dividend recd

	15th dec 2017	Cash A/C-45200 shares *$.80 /Share	$36,160
		To Investment in Gregson Inc		$36,160
		To record the dividend recd

	31st Dec 2017	Investment in Gregson inc ($516000*10%)	$51,600
		To Revenue from Investment		$51,600
		To Record the share of Net income in Gregson
		Inc

ekkarill92 answered 1 year ago

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