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Chapter 13: Q1IFRS (page 658)
Where can authoritative IFRS be found related to investments?
It is found in IFRS 9.
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Consider the bond investment by Lady Gaga in IFRS17-5. Discuss the accounting for this investment if Lady Gaga’s
Business model is to hold the investment to collect interest while outstanding and to receive the principal at maturity.
Indicate how unrealised holding gains and losses should be reported for investments classified as trading and held-for-collection.
Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for \(13,200. During the year, Sherman paid a cash dividend of \)3.25 per share. At year-end, Sherman shares were selling for $34.50 per share. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment
How does the acid-test ratio differ from the current ratio? How are they similar?
(Equity Method) On January 1, 2017, Pennington Corporation purchased 30% of the common shares of Edwards
Company for \(180,000. During the year, Edwards earned a net income of \)80,000 and paid dividends of $20,000.
Instructions
Prepare the entries for Pennington to record the purchase and any additional entries related to this investment in Edwards Company
in 2017.
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