Question

In: Accounting

Entity A invested in 22,000 shares of a listed company on 1 November 2019 at a...

Entity A invested in 22,000 shares of a listed company on 1 November 2019 at a cost of $4.25 per share.

On 31 December 2019, the shares have a market value of $4.73. The shares are held for trading.

The end of the reporting period is 31 December.

REQUIRED:

(1) Measure the gain or loss of measurement of the shares recognized in the Statement of Profit or Loss on 31 December 2019.

(2) Measure the value of the shares recognized in the Statement of Financial Position on 31 December 2019.

Expert Solution

In case where the shares are held for trading , it is to be recorded at market value/fair value at the end of the year reporting ,

the change in market value over the fair value or the original cost is recorded as unrealised gain or loss andit is to be treated as earnings.An increase or decrease in the fair value of a held-for-trading security requires an accounting adjustment,

The adjustment should be made in a special account "securities fair value adjustment (trading)" a debit iis made when the securities value increase and a credit is mde when the market value decreases for the securities, the other effect is given to the other income.

In the given case,

1. Measurement of gain or loss to be recognised in profit or loss:

The cost value/fair value at the time of purchase = $4.25 per share for 22000 share giving total value = $93500

The market value at the reportig period on 31st december 2019 = $4.73 per share for 22000 share = $ 104060

Thus the net income to be recognised in profit & loss on 31st december 2019 = $10560

2. The value of the shares recognized in the Statement of Financial Position on 31 December 2019.

The value should be the fair value to be shown at the reporting date

it is $4.73 per share for 22000 shares = $ 104060

ekkarill92 answered 1 year ago

Entity A invested in 20,000 shares of a listed company in October 2019 at a cost...

Entity A invested in 20,000 shares of a listed company in October 2019 at a cost of $3.80 per share. On 31 December 2019, the shares have a market value of $3.40. Entity A is not planning on selling these shares in the short term and elects to hold them as Fair Value through Other Comprehensive Income. REQUIRED: (1) Measure the amounts of the equity investment recognised in the Statement of Financial Position for the year-end of 2019. (2) Measure...

On 1 November 2019, Pink Ltd issued a prospectus inviting applications for 200 000 ordinary shares...

On 1 November 2019, Pink Ltd issued a prospectus inviting applications for 200 000 ordinary shares to the public at an issue price of $4, payable as follows: $2 on application (due by closing date of 1 February 2020) $1 on allotment (due 31 March 2020) $1 on future call/calls to be determined by the directors By 1 February 2020, applications had been received for 250 000 ordinary shares of which applicants for 100 000 shares forwarded the full $4...

Graham Potato Company has projected sales of $20,400 in September, $22,000 in October, $30,400 in November,...

Graham Potato Company has projected sales of $20,400 in September, $22,000 in October, $30,400 in November, and $26,400 in December. Of the company's sales, 30 percent are paid for by cash and 70 percent are sold on credit. Experience shows that 40 percent of accounts receivable are paid in the month after the sale, while the remaining 60 percent are paid two months after. Determine collections for November and December. Also assume Graham’s cash payments for November and December...

Entity A is a listed company that operates the cruise ship business. One of the cruise...

Entity A is a listed company that operates the cruise ship business. One of the cruise ships was purchased on 1 Oct 2011. This cruise ship is made up of three main components: (1) cruise’s fabric, (2) cabins and entertainment area and (3) fittings propulsion system. Details of the cost of its components and their estimated useful lives are as below: Components Original cost Depreciation basis (1) Cruise’s fabric (hull, decks, etc.) HK$37,500,000 50 years straight-line (2) Cabins and entertainment...

1. An entity issues shares as consideration for the purchase of inventory. The shares were issued...

1. An entity issues shares as consideration for the purchase of inventory. The shares were issued on January 1, 2009. The inventory is eventually sold on December 31, 2010. The value of the inventory on January 1, 2009, was $3 million. This value was unchanged up to the date of sale. The sale proceeds were $5 million. The shares issued have a market value of $3.2 million. Which of the following statements correctly describes the accounting treatment of this share-based...

Baltic Limited is a listed company based in California. On January 1, 2019, the company granted...

Baltic Limited is a listed company based in California. On January 1, 2019, the company granted 10,000 share units to its vice president. Each share unit has a contractual service period of five years and a vesting condition based on market performance. Each share unit is convertible into ordinary shares of Baltic Limited as follows: If the company’s share price increases by more than the Nasdaq Composite index over the five years, each share unit converts into 5 shares. If...

Grouper Corp. was organized on January 1, 2022. It is authorized to issue 22,000 shares of...

Grouper Corp. was organized on January 1, 2022. It is authorized to issue 22,000 shares of 6%, $53 par value preferred stock and 456,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year. Jan. 10 Issued 68,000 shares of common stock for cash at $6 per share. Mar. 1 Issued 1,160 shares of preferred stock for cash at $56 per share. May 1 Issued 113,000 shares...

GOLDEN Corporation was organized on January 1, 2018. It is authorized to issue 22,000 shares of...

GOLDEN Corporation was organized on January 1, 2018. It is authorized to issue 22,000 shares of $3-noncumulative preferred shares and an unlimited number of common shares. The following share transactions were completed during the first year. Record the above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Round average cost per share to 2 decimal places, e.g. 2.55 and answers to the nearest dollar e.g. 5,121. If no entry is required, select...

To please be done in excel: It is November, 2001. ABC Ltd. is a company listed...

To please be done in excel: It is November, 2001. ABC Ltd. is a company listed on the Stock Exchange. The company was founded in the early 1980’s and management identified a market for small photocopier and fax machines and in later years, tablets. The company has in the past relied on importing equipment from the Far East, but the recent decline in the value of the Peso, combined with increased local competition, has resulted in a significant decrease in...

The following information pertains to the payrolls of COYOTE Company for November 2019:

The following information pertains to the payrolls of COYOTE Company for November 2019:Employees Wage earned Wage earned Federal Income State/local By 10/31/2019 in November 2019 Tax Income TaxesJane $116,000 $11,000 $2,200 $1,100Tom 80,000 8,000 1,600 800Bill 6,500 1,500 0 0Actual state unemployment tax rate is 4%, while the federal unemployment tax rate is 1%. The taxable income limit for social security tax is $120,000/person, year, while the taxable income limit for SUTA and FUTA is $7,000/ person, year.Instructions: Prepare the necessary journal entries for November payrolls of COYOTE Company if salaries and wages are paid in cash after withholding all...