Question

On february 12, 2018, lily corporation invested $1,320,00 in short term available-for-sale marketable securities. The market value of this investment was $1,400,000 at december 31, 2018, but had slipped to $1,390,000 by December 2019.

In financial statements prepared on december 31, 2019, Lily corporation reports:

a. The asset investment in marketable securities at $1,320,000 with footnote disclosure of the market value of $1,400,000.

b. The asset investment in marketable securities at $1,390,000 and a $70,000 gain recognized in the income statement.

c.The asset investment in marketable securities at $1,390,000 and a $70,000 unrealized holding gain included in total stockholders’ equity.

d.The asset investment in marketable securities at $1,400,000, and a $80,000 unrealized holding gain included in total stockholders’ equity.

International standards require that goodwill "

a. be capitalized and amortized over 20 years or less.

b. be capitalized and amortized over 40 years or less.

c. be capitalized and reviewed annually and its value should be adjusted if impaired.

d. be expensed immediately.

Answer 1

On february 12, 2018, lily corporation invested $1,320,00 in short term available-for-sale marketable securities. The market value of this investment was $1,400,000 at december 31, 2018, but had slipped to $1,390,000 by December 2019.

In financial statements prepared on december 31, 2019, Lily corporation reports:

c. The asset investment in marketable securities at $1,390,000 and a $70,000 unrealized holding gain included in total stockholders’ equity.

Reason: AS per IAS 39 and IAS 109, The investment in short term available-for-sale marketable securities should be reported on fair (market) value. Any unrealised gain or loss should be recognized through OCI in the equity statement, unless the securities are sold.

International standards require that goodwill "

c. be capitalized and reviewed annually and its value should be adjusted if impaired.

Reason: Intangible assets are measured initially at cost. After initial recognition, an entity usually measures an intangible asset at cost less accumulated amortisation. It may choose to measure the asset at fair value in rare cases when fair value can be determined by reference to an active market.

An intangible asset with a finite useful life is amortised and is subject to impairment testing. An intangible asset with an indefinite useful life is not amortised, but is tested annually for impairment. When an intangible asset is disposed of, the gain or loss on disposal is included in profit or loss.