Question

Ayayai Corporation made the following purchases of investments during 2020, the first year in which Ayayai invested in equity securities: 1. On January 15, purchased 8,100 shares of Nirmala Corp.'s common shares at $30.10 per share plus commission of $1,782. 2. On April 1, purchased 4,500 shares of Oxana Corp.'s common shares at $47 per share plus commission of $3,033 3. On September 10, purchased 6,300 shares of WTA Corp.'s preferred shares at $23.90 per share plus commission of $2,619. On May 20, 2020, Ayayai sold 2,700 of the Nirmala common shares at a market price of $32 per share less brokerage commissions of $2,565. The year-end fair values per share were as follows: Nirmala $27, Oxana $50, and WTA $25. The chief accountant of Ayayai tells you that Ayayai Corporation holds these investments with the intention of selling them in order to earn short-term profits from appreciation in their prices and accounts for them using the FV-NI model. Assume that Ayayal Corporation follows IFRS 9. Prepare the journal entries to record the three investments. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit Date Account Titles and Explanation Jan. 15 FV-NI Investments Investment Income or Los Cash Apr. 1 FV-NI Investments Investment Income or Los Cash Sep. 10 FV-NI Investments Investment Income or Los Cash Prepare the journal entry for the sale of the 2,700 Nirmala shares on May 20. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit May 20 Cash FV-NI Investments Gain on Disposal of Invest Prepare the adjusting entry needed on December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31 FV-NI Investments Investment Income or Los Repeat the parts above, assuming the investments are accounted for using FV-OCI with no recycling. Ayayai's policy

Answer 1

Journal Enties using the FV-NI Model:

Date	Account Title and Explanation	Debit $	Credit $
Jan.15	Investment in Shares of Nirmala Corp. (8,100*$30.10)	243,810
	Investment Income / Loss	1,782
	Cash		245,592
	(To record investment in Nirmala corp.)
April 1	Investment in Shares of Oxana Corp. (4,500*$47)	211,500
	Investment Income / Loss	3,033
	Cash		214,533
	(To record investment in Oxana corp.)
Sept.10	Investment in Share of WTA Corp. (6,300*$23.90)	150,570
	Inveatment Income / Loss	2,619
	Cash		153,189
	(To record investment in WTA corp.)
May 20	Cash	88,965
	Investment in Shares of Nirmala Corp.(2,700*$32)		86,400
	Investment Income / Loss		2,565
	(To record sale of 2,700 shares of Nirmala corp.)
Dec.31	Investment in Shares of Oxana corp.	13,500
	Investment in Shares ofWTA corp.	6,930
	Investment in Shares of Nirmala Corp.		16,740
	Investment Income or Loss (Working)		3,690
	(To record year end adjustment)

Working:

Adjustment at the year end:

Particulars		Cost	Fair Value	Difference
Nirmala corp.	(243,810/8,100)*5,400	162,540	145,800 (5,400*$27)	(16,740)
Oxana corp.		211,500	225,000 (4,500*$50)	13,500
WTA corp.		150,570	157,500 (6,300*$25)	6,930
TOTAL		524,610	528,300	3,690

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