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In: Accounting

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 the amounts recognised in the Statement of Profit or Loss for the financial asset as at 31 December 2019.

(3) Measure the amounts of the fair value reserve recognised in the Statement of Financial Position for the year-end of 2019.

Solutions

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Required 1 Amount of Equity Investment to be recognized in the statement of financial position
Particulars Amount
No of shares       20,000
Market value at December 31, 2019          3.40
Value of Equity Investment       68,000
Required 2 Fair value loss to be recognized in the Other Comprehensive income section of Statement of profit and loss
Particulars Amount
No of shares       20,000
Purchase Price          3.80
Market value at December 31, 2019          3.40
Fair value Loss         8,000
Required 3 Fair value reserve to be recognized in the statement of financial position
The Company should recognize the fair value reserve $ 8,000 in the statement of financial position

ekkarill92 answered 2 years ago
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