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In: Accounting

On 1 June 2019, Sunshine Ltd purchased 50,000 shares in Tourism Ltd at a price of...

On 1 June 2019, Sunshine Ltd purchased 50,000 shares in Tourism Ltd at a price of $8 each. The transaction costs for the purchase are $4,000, paid in cash. On 31 May 2020 (Balance Date), the closing market price for a share in Tourism Ltd is $3. The Investment in Tourism Ltd is not held for trading.  

REQUIRED:

  1. Assuming Sunshine Ltd measures its share investments at “fair value through profit or loss”,  provide the journal entries to account for the investment in Tourism Ltd shares as required by NZ IAS 32 and NZ IFRS 9, and disclose the financial asset and related gain or loss on fair value on the financial statements for the year ending 31 May 2020.

  1. Assuming Sunshine Ltd has made the election to account for its share investments at “fair value through other comprehensive income”, provide the journal entries to account for the investment in Tourism Ltd shares as required by NZ IAS 32 and NZ IFRS 9, and disclose the financial asset and related gain or loss on fair value on the financial statements for the year ending 31 May 2020.

  1. In your own words, explain why the company may choose to account for its share investments at “fair value through other comprehensive income” over “fair value through profit or loss”. (Maximum words: 150).

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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