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SPRING 2015
SOLUTIONS TO ASSIGNMENT 1
QUESTION 1 (20 marks)
PART A
The investment is being accounted for at fair value through other comprehensive income:
Jan 1/13
498,000
Sept 30/13
Cash
Dividend income
(To record receipt of dividends: 15% of $240,000)
36,000
Dec 31/13
22,000
Now the investment must be accounted for using the equity method because the investor
has significant influence:
Jan 1/14
1,040,000
Oct 31/14
Cash
Investment in Peach Corporation
(To record receipt of dividends: 45% of $250,000)
112,500
Dec 31/14
243,000
42,000
520,000
1,040,000
(112,500)
243,000
(42,000)
1,648,500
PART B
This investment is valued at fair value thourgh other comprehensive income for the entire
The percentage ownership is just a guide; if the question says they used FVOCI throughou
that they did not have significant influence, notwithstanding their 25% shareholding.
Jan 1/13
150,000
June 30/13
Cash
Dividend income
(To record dividend from Ecru Ltd.: 10% of $100,000)
10,000
Dec 31/13
Cash
Dividend income
(To record dividend from Ecru Ltd.)
10,000
30,000
Jan 1/14
June 30/14
Cash
Dividend income
(To record dividend from Ecru Ltd.: 25% of $100,000)
25,000
July 1/14
35,000
Cash
Investment in Ecru
(To record sale of shares)
70,000
Cash
Dividend income
(To record dividend from Ecru Ltd.: 20% of $100,000)
195,000
1,000
20,000
20,000
comprehensive income:
498,000
0.5
36,000
1.0
22,000
1.0
1,040,000
0.5
112,500
1.0
243,000
1.0
42,000
3.0
1.0
2.0
11.0
150,000
0.5
10,000
0.5
10,000
0.5
30,000
1.0
195,000
0.5
25,000
0.5
35,000
1.0
70,000
1.0
1,000
2.0
20,000
0.5
20,000
1.0
9.0
300,000
300,000
COMMERCE/BUSINESS 453
SPRING 2015
SOLUTIONS TO ASSIGNMENT 1
QUESTION 2 (20 marks)
The investment is being accounted for at fair value through net income:
Jan 1/10
June 1/10
Dec 1/10
Dec 31/10
Jan 1/11
June 1/11
Dec 1/11
Dec 31/11
100,000
Cash
2,500
Dividend income
(To record receipt of June 1 dividend: 10% of $25,000))
2,500
Cash
Dividend income
(To record receipt of Dec 1 dividend)
2,500
2,500
10,000
55,000
Cash
4,500
Dividend income
(To record receipt of June 1 dividend: 15% of $30,000))
4,500
Cash
Dividend income
(To record receipt of Dec 1 dividend)
4,500
4,500
15,000
Now the investment must be accounted for using the equity method:
Jan 1/12
180,000
June 1/12
Cash
13,500
Investment in Slow Ltd.
(To record receipt of June 1 dividend: 30% of $45,000))
13,500
June 30/12
June 30/12
Investment income
7,500
Investment in Slow Ltd.
(To record amortization of acquisition differential
for first half of 2012 -- see calculation below)
July 1/2012
Dec 1/2012
7,500
201,750
Cash
20,250
Investment in Slow Ltd.
(To record receipt of Dec 1 dividend: 45% of 45,000)
20,250
Dec 31/12
Dec 31/12
Investment income
13,929
Investment in Slow Ltd.
(To record amortization of acquisition differential
for second half of 2012 as calculated below)
Dec 31/12
Dec 31/12
13,929
Cash
480,000
Investment in Slow Ltd.
(To record final purchase of shares in Slow Ltd.)
480,000
145,929
360,000
300,000
60,000
60,000
-
201,750
156,750
45,000
45,000
-
7,500
7,500
6,429
13,929
360,000
27,000
(13,500)
(7,500)
201,750
40,500
(20,250)
(13,929)
480,000
1,054,071
1,200,000 (75,000 shares @ $16)
145,929
0.5
0.5
0.5
1.0
0.5
0.5
0.5
1.0
0.5
1.0
1.5
2.0
0.5
1.0
2.0
f $90,000)
3.0
0.5
3.0
20.0
COMMERCE/BUSINESS 453
SPRING 2014
SOLUTIONS TO ASSIGNMENT 1
QUESTION 3 (10 marks)
1
10