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Chapter 13: 9IFRS (page 658)

Carow Corporation purchased, as a held-for-collection investment, \(60,000 of the 8%, 5-year bonds of Harrison, Inc.

for \)65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) the purchase

of the investment, and (b) the receipt of semiannual interest and premium amortization

Short Answer

Expert verified

Debt investment debited by $65,118 and cash credited by $65,118. Cash debited by $2,400, debt investment credited by $446.5, and interest revenue credited by $1,953.5.

Step by step solution

01

Entry for the purchase of the bond.

Date

Particulars

Debit

Credit

Debt Investment

$65,118

Cash

$65,118

(Being entry for the purchase of debt investment)

02

Entry for the interest revenue

Date

Particulars

Debit

Credit

Cash

$2,400

Debt Investment

$446.5

Interest Revenue

$1,953.5

(Being entry for the interest revenue and premium on bond amortisation)

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Most popular questions from this chapter

Assume the same information as in IFRS 17-12 except that Roosevelt has an active trading strategy for these bonds.

The fair value of the bonds at December 31 of each end-year is as follows.

2017 \(534,200 2020 \)517,000

2018 \(515,000 2021 \)500,000

2019 $513,000

Instructions

(a) Pepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2017.

(c) prepare the journal entry to record the recognition of fair value for 2018.

How are the terms “probable,” “reasonably possible,” and “remote” related to contingent liabilities?

Use the information from IFRS17-10 but assume the shares were purchased to meet a non-trading regulatory requirements. Prepare Fairbanks' journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment.

Journal Entries for Fair Value and Equity Methods) The following are two independent situations.

Situation 1: Conchita Cosmetics acquired 10% of the 200,000 shares of common stock of Martinez Fashion at a total cost of \(13 per

share on March 18, 2017. On June 30, Martinez declared and paid \)75,000 cash dividends to all stockholders. On December 31,

Martinez reported net income of \(122,000 for the year. At December 31, the market price of Martinez Fashion was \)15 per share.

Situation 2: Monica, Inc. obtained significant influence over Seles Corporation by buying 30% of Seles’s 30,000 outstanding shares

of common stock at a total cost of \(9 per share on January 1, 2017. On June 15, Seles declared and paid cash dividends of \)36,000

to all stockholders. On December 31, Seles reported a net income of $85,000 for the year.

Instructions

Prepare all necessary journal entries in 2017 for both situations.

In determining the amount of a provision, a company using IFRS should generally measure:

(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.

(b) Using the minimum amount of the loss in the range.

(c) Using the best estimate of the amount of the loss expected to occur.

(d) Using the maximum amount of the loss in the range.
See all solutions

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