Question

Complete the following schedule to show the separate amounts that should be reported on the current year's income statement of Company P: (Amounts to be deducted should be indicated by a minus sign.) COMPANY P Current Year DOLLAR AMOUNTS 3,200 shares 8,000 shares Income Statement (Other items): 1,950 $ Dividend revenue 0 (9,600) Unrealized loss 0 $ Equity in investee earnings 12,000
Company T had 32,000 outstanding shares of common stock, par value $10 per share. On January 1 of the current year, Company P purchased some of Company T’s shares as a long-term investment at $23 per share. At the end of the current year, Company T reported the following: income, $48,000, and cash dividends declared during the year, $19,500. The fair value of Company T stock at the end of the current year was $20 per share.

2-a. Prepare the journal entries for Company P at the dates indicated assuming 3,200 shares of Company T were purchased. Assume the investment will be held long term.

2-b. Prepare the journal entries for Company P at the dates indicated assuming 8,000 shares of Company T were purchased. Assume the investment will be held long term.

3-a. Complete the following schedule to show the separate amounts that should be reported on the current year's balance sheet of Company P:

3-b. Complete the following schedule to show the separate amounts that should be reported on the current year's income statement of Company P:

Answer 1

IFRS-9 :All equity investments in scope of IFRS 9 are to be measured at fair value in the statement of financial position, with value changes recognised in profit or loss, except for those equity investments for which the entity has elected to present value changes in 'other comprehensive income'. Accordingly,

2. Journal Entries :

	Transaction	General Journal	Debit	Credit
1	a (3200 shares)	Investments Dr	73600		=23*3200
		To Cash		73600
		Cash Dr	1950
		To Dividend Income		1950
		Unrealized Loss Dr	9600		=3*3200
		To Investments		9600
2	b(8000 shares)	Investments Dr	184000		=23*8000
		To Cash		184000
		Investments Dr	16875		=(48000+19500)*8000/32000
		Equity in Investee Earnings		16875
		Unrealized Loss Dr	24000		=3*8000
		To Investments		24000

3. (a) Balance Sheet :

Company P
Current Year
	Dollar Amounts
	3200 Shares	8000 Shares
Non Current Assets:
Investments	64000	176875
	(73600-9600)	(184000+16875-24000)

(b) Income Statement :

Company P
Current Year
	Dollar Amounts
	3200 Shares	8000 Shares
Income Statement (Other Items):
Dividend Income	1950	0
Equity in Investee Earnings	0	16875
Unrealized Loss	-9600	-24000
Total	-7650	-7125