Question

Purchased 50,000 of the 80,000 shares outstanding for The Natural Pharmacy Inc. Purchased 20,000 of 50,000 shares outstanding for Metro Inc. Purchased 30,000 of 60,000 shares outstanding for Le Petite Boulangerie Inc. Purchased 40,000 of 75,000 shares outstanding for Wood Passion Ltd. problem 15-1A Non-strategic investments LO2, 3 CHECK FIGURE: 2. Feb 16, 2021, Investment Income = $5,415 Lie Large Inc. had the following transactions involving non-strategic investments during 2020. W mes of investmell. sualled PROBLEMS 2020 ing Paid $108,000 to buy a 90-day term deposit $108,000 principal amount, 6.5%, dated April 1 Api 12 Purchased 3,800 common shares of Blue Balloon Ltd. at $24.25 Purchased 2,600 common shares of Purple Car Corp. at $51.00 20 Purchased 1,100 common shares of Yellow Tech Ltd. at $17.75. 1 Purchased for $75,561 a 8.5%, $73,000 Space Explore Inc. bond that matures in eight years when the market My Interest rate was 7.9% Interest is paid semiannually beginning December 31, 2020. Live Large Inc. plans to hold this investment until maturity. 3 Received a cheque for the principal and accrued interest on the term deposit that matured on June 30. 15 Received a $0.95 per share cash dividend on the Blue Balloon Ltd. common shares. 28 Sold 1,900 of the Blue Balloon Ltd. common shares at $28.00. Sept 1 Received a $2.90 per share cash dividend on the Purple Car Corp. common shares. Dec 15 Received a $1.45 per share cash dividend on the remaining Blue Balloon Ltd. common shares owned. 31 Received the interest on the Space Explore Inc. bond. 31 The fair values of Live Large Inc.'s investments on this date were Blue Balloon shares, $25.40: Purple Car Corp shares, $43.15: Yellow Tech shares, $18.05. Assume the fair value and the carrying value of the Space Explore bond were equal. 2021 Feb 16 Sold the remaining Blue Balloon shares at $28.25. WO 1017

Answer 1

Answer:-

Part 1

	Cash Interest Received	Period Interest Income	Premium Amort.	Unamortized Premium	Carrying Value
July 1/20				$2,561	$75,561
Dec. 31/20	$3,103	$2,985	$118	2,443	75,443
June 30/21	3,103	2,980	123	2,320	75,320
Dec. 31/21	3,103	2,975	128	2,192	75,192

Part 2

2020
Apr.	1	Investment – Term Deposit...........................................	108,000
		Cash.....................................................................		108,000
		Purchased 6.5% term deposit as short-term investment.
12	Investment – Blue Balloon Shares.................................	92,150
	Cash.....................................................................		92,150
	To record purchase of short-term investment; 3,800 × 24.25 = 92,150.
June 9	Investment – Purple Car Shares...................................	132,600
	Cash.....................................................................		132,600
	To record purchase of short-term investment; 2,600 × 51.00 = 132,600.
20	Investment – Yellow Tech Shares.................................	19,525
	Cash.....................................................................		19,525
	To record purchase of short-term Investment; 1,100 × 17.75 = 19,525.

July 1	Investment – Space Explore Bond.............................	75,561
	Cash..................................................................		75,561
	Purchased a8.5%, 8-year bond.
3	Cash............................................................................	109,731
	Investment – Term Deposit.........................................		108,000
	Interest Income.................................................		1,731
	To record collection of term deposit and interest earned; 108,000 × 6.5% × 90/365 = 1,731.
15	Cash............................................................................	3,610
	Dividend Income...............................................		3,610
	To record collection of dividend income; 3,800 × 0.95 = 3,610.
28	Cash............................................................................	53,200
	Investment Income (Loss)..........................................		7,125
	Investment – Blue Balloon Shares...............................................................		46,075
	To record sale of actively traded investments; 1,900 × 28.00 = 53,200; 92,150/3,800 = 24.25 × 1,900 = 46,075.
Sept. 1	Cash............................................................................	7,540
	Dividend Income...............................................		7,540
	To record collection of dividend income; 2,600 × 2.90 = 7,540.
Dec. 15	Cash............................................................................	2,755
	Dividend Income...............................................		2,755
To record collection of dividend income; 1,900 × 1.45 = 2,755.
31	Cash............................................................................	3,103
	Investment – Space Explore Bond.............................		118
	Interest Income.................................................		2,985
	Collected interest on the bond; 73,000 × 8.5% × 6/12.

Dec. 31	Investment – Blue Balloon Shares...............................	2,185
	Investment – Yellow Tech Shares...............................	330
	Investment Income (Loss)............................................	17,895
	Investment – Purple CarShares...................................		20,410
	To record fair valueadjustment.
		Cost	Fair Value	Difference
	Blue Balloon Ltd.(1,900 × 25.40 = 48,260)........	$ 46,075	$ 48,260	$ 2,185
	Purple Car Corp. (2,600 × 43.15 = 112,190).....	132,600	112,190	(20,410)
	Yellow Tech Ltd. (1,100 × 18.05 = 19,855).......	19,525	19,855	330
	Total...................................................................	$198,200	$180,305	$(17,895)
2021
Feb. 16	Cash.............................................................................	53,675
	Investment Income (Loss)............................................		5,415
	Investment – Blue Balloon Shares...............................		48,260
	To record sale of investment; 1,900 × 28.25 = 53,675.

Part 3

Live Large Inc.

Partial Balance Sheet

December 31, 2020

Assets

Current assets:

Investments, at fair value.................................................................................. $ 180,305

Non-Current investments:

Investments, at amortized cost.......................................................................... 75,443

Analysis component:

The investment income on the Blue Balloon Ltd. shares on December 31, 2020 results from the fair valueadjustment at the end of the accounting period; it is not the result of a transaction. The investment incomefrom the sale of shares on February 16, 2021results from the sale of the investment; it is as a result of a transaction. Accounting standards record both adjustments to current period income under the Investment Income (Loss) line item on the income statement.