Question

The following information relates to the 2020 debt and equity investment transactions of Flint Ltd., a publicly accountable Canadian corporation. All of the investments were acquired for trading purposes and accounted for using the FV-NI model, with all transaction costs being expensed. No investments were held at December 31, 2019, and the company prepares financial statements only annually, each December 31, following IFRS. 1. On February 1, the company purchased Williams Corp. 12% bonds, at par value for $460,000, plus accrued interest. Interest is payable April 1 and October 1. 2. On April 1, semi-annual interest was received on the Williams bonds. 3. On July 1, 9% bonds of Saint Inc. were purchased. These bonds, with a par value of $168,000, were purchased at par plus accrued interest. Interest dates are June 1 and December 1. 4. On August 12, 2,400 shares of Scotia Corp. were acquired at a cost of $58.00 per share. A 1% commission was paid. 5. On September 1, Williams Corp. bonds with a par value of $92,000 were sold at 103.6 plus accrued interest. 6. On September 28, a dividend of $0.46 per share was received on the Scotia Corp. shares. 7. On October 1, semi-annual interest was received on the remaining Williams Corp. bonds. 8. On December 1, semi-annual interest was received on the Saint Inc. bonds. 9. On December 28, a dividend of $0.48 per share was received on the Scotia Corp. shares. 10. On December 31, the following fair values were determined: Williams Corp. bonds 101.50; Saint Inc. bonds 96; and Scotia Corp. shares $59.50.

Prepare all 2020 journal entries necessary to properly account for the investment in the Williams Corp. bonds. Date Account Titles and Explanation Debit Credit Feb. 1 Apr. 1 Sept. 1 Oct1 DEC 31 RECORD accrue interest record fair value adjustment

Answer 1

Date	Account title	Debit	credit
Feb 1	FV-NI investment	460000
	Interest receivable	18400
	cash		478400
	[Being investment acquired with 4 month interest accrued (1Oct- 1Feb) 460000*.12*4/12= 18400
April 1	cash (460000*.12*6/12)	27600
	Interest receivable		18400
	Interest revenue		9200
July 1	FV-NI investment	168000
	Interest receivable	1260
	cash		169260
	[Being investment acquired with 4 month interest accrued (1June -1 July ) 168000*.09*1/12= 1260
August 12	FV-NI investment (2400*58)	139200
	Investment income or loss (139200*1%)	1392
	cash		140592
Sep 1	cash	99912
	Interest revenue		4600
	FV-NI investment		92000
	Investment income or loss		3312
	[Being investment sold along with interest accrued for 5 months (1April -1Sep) 92000*12%*5/12]. Investment gain :92000*(103.6-100)/100= 3312
Sep 28	cash (2400*.46)	1104
	Dividend revenue		1104
Oct1	Cash	22080
	Interest revenue		22080
	[Being interest accrued on remaining bonds :[460000-92000]*.12*6/12
December 1	cash (168000*.09*6/12)	7560
	Interest revenue (		6300
	Interest receivable		1260
Dec 28	cash (2400*.48)	1152
	Dividend revenue		1152
Dec 31	Interest receivable	12300
	Interest revenue		12300
Dec31	FV-NI investment/Fair value adjustment	2400
	Investment income or loss		2400

working :

Interest accrual :

Company	Par value	interest rate	period of interest accrued from last payment	Interest
Williams corp	460000-92000=368000	12%	3 months   (1Oct-31Dec)	368000*.12*3/12= 11040
Saint Inc	168000	9%	1 month      (1Dec- 31Dec)	168000*.09*1/12=1260
Total interest accrued				12300

Fair value adjustment

	cost	market value
Williams co.	368000	368000*101.5/100=373520
Saint Inc	168000	168000*96/100= 161280
Scotia corp	139200	2400*59.5= 142800
Total	675200	677600

Investment income due to unrealized holding gain = 677600-675200= 2400