Question

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 2 years ago
Next > < Previous

Related Solutions

1.) On June 1, 2020, Hanes Company purchased 10 computers with an invoice price of $50,000....
1.) On June 1, 2020, Hanes Company purchased 10 computers with an invoice price of $50,000. Other costs incurred were sales tax $2,100, Freight $300, installation of $2,300, testing of $300, prepaid insurance to cover the computers; $3,600. The computers are estimated to have a 5-year life and $5,000 salvage value. Instructions: Find the cost of new computers. ___________________________     What is depreciation for 2020 and 2021 if the company uses the double-declining balance method.                                                       2020 ______________________________                                                            2021...
Cider company purchased a 15-month, $50,000, 6% note on June 1, 2019. What is the journal...
Cider company purchased a 15-month, $50,000, 6% note on June 1, 2019. What is the journal entry for December 31, 2019? A. Interest Income $1500 Interest receivables $1500 B. Interest Receivable: 1,500 interest income: 1,500 C. interest income: 1,750 interest receivable 1,750 D. interest receivable 1,750 interest income 1,750 On December 31, 2018, the payment on a $4,500, 120-day, 10% note dated November 1, 2018, will recognize: (please round to the nearest dollar and use 365 day year) A. interest...
On January 1, 20X1, Investor Inc. purchased 25% of the common shares of Associate Ltd. for $50,000
ICP 2 On January 1, 20X1, Investor Inc. purchased 25% of the common shares of Associate Ltd. for $50,000. It was determined that Investor had significant influence over the operating and financial policies of Associate. On the date of acquisition, the net assets of Associate totalled $180,000 (common shares of $100,000 and retained earnings of $80,000), and the carrying values of the identifiable assets and liabilities approximated their fair values. Both companies’ income tax rate is 20%. The following information...
Bay Inc. purchased some new equipment on January 1, 2019, with a list price of $50,000....
Bay Inc. purchased some new equipment on January 1, 2019, with a list price of $50,000. The supplier agreed to accept a deposit of $20,000 on the date of purchase and a promissory note requiring payment of $10,000 on each December 31 for the next three years (December 31, 2019, to December 31, 2021). Bay is pleased that no interest is charged on the note since its bank would have charged 7% interest. The equipment arrived on January 5, 2019,...
Avadi Ltd. purchased $200,000 face value 7% bonds on June 1, 2019. Interest on the bonds...
Avadi Ltd. purchased $200,000 face value 7% bonds on June 1, 2019. Interest on the bonds will be paid semi-annually on May 31st and November 30th. The yield rate at the time of purchase was 5%. The bonds will mature in five years from the date of purchase. Assume Avadi Ltd. prepares financial statements in accordance with IFRS and uses the amortized cost model. Required: 1. Record the entry for the purchase of the bond. 2. Record the entry as...
ON JANUARY 1, 2016 FLORIDA PURCHASED ALL THE OUTSTANDING COMMON SHARES OF SUNSHINE CO FOR $3,500,000...
ON JANUARY 1, 2016 FLORIDA PURCHASED ALL THE OUTSTANDING COMMON SHARES OF SUNSHINE CO FOR $3,500,000 CASH.AT THE DATE OF ACQUISITION, SUNSHINE EQUITY ACCOUNTS HAD THE FOLLOWING BALANCES: COMMON STOCK$500,000 PAID IN CAPITAL$1,800,000 RETAINED EARNINGS$700,000 ALL OF SUNSHINE'S ASSETS WERE FAIRLY STATED EXCEPT FOR THE FOLLOWING: EQUIPMENT: BOOK VALUE $180,000, FAIR VALUE $270,000, EST LIFE 5 YEARS BUILDING: BOOK VALUE $600,000, FAIR VALUE $800,000, EST LIFE 10 YEARS SUNSHINE ALSO HAD A COPYRIGHT WITH A FAIR VALUE OF $160,000 WITH...
Gundagai Ltd was incorporated on June 30, 2019. On July 1, 2019, the company issued a...
Gundagai Ltd was incorporated on June 30, 2019. On July 1, 2019, the company issued a prospectus offering 300,000 ordinary shares at an issue price of $10, payable on the following terms. $3 on application $3 on allotment $2 on the first call $2 on the second call A summary of the applications and allotments register follows. Amount paid per share on application Number of shares applied for Number of shares allotted $3.00 200,000 150,000 $6.00 100,000 100,000 $10.00 50,000...
Gundagai Ltd was incorporated on June 30, 2019. On July 1, 2019, the company issued a...
Gundagai Ltd was incorporated on June 30, 2019. On July 1, 2019, the company issued a prospectus offering 300,000 ordinary shares at an issue price of $10, payable on the following terms. $3 on application $3 on allotment $2 on the first call $2 on the second call A summary of the applications and allotments register follows. Amount paid per share on application Number of shares applied for Number of shares allotted $3.00 200,000 150,000 $6.00 100,000 100,000 $10.00 50,000...
On 1 June 2019 Flawless Ltd sold land to Connell Ltd at fair value. The consideration...
On 1 June 2019 Flawless Ltd sold land to Connell Ltd at fair value. The consideration paid to Flawless Ltd comprised cash and options. The options can be converted into ordinary shares in Connell Ltd at any time over the next seven years. If the options were exercised, Flawless Ltd would hold 65% of the voting rights in Connell Ltd. Flawless Ltd does not intend to exercise the options as they are not interested in obtaining an ownership interest in...
On 1 July 2019 Short Ltd acquired 80% of the shares of Tall Ltd for $436...
On 1 July 2019 Short Ltd acquired 80% of the shares of Tall Ltd for $436 200. At this date the equity of Tall Ltd consisted of share capital of $280 000 and retained earnings of $140 000. All the identifiable asset and liabilities of Tall Ltd were recorded at amounts equal to fair value except for: Carrying amount FV Land 80 000 95 000 Plant (Cost $380 000) 300 000 330 000 Inventories 15 000 18 000 The plant...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT