On January 1, 2021 Design Corporation (DC) purchased 15% of Angel Inc. (AI) for$ 4,000,000. It has been determined that DC does not have significant influence overAI at this time.AI reported net income of $ 1,000,000 for the year ended December31, 2021. They paid dividends of $ 100,000 in total for the year. The fair value of AIwas $ 30,000,000 at December 31, 2021. DC considers AI as part of their activetrading portfolio and AI is a public company.On July 1, 2021, DC purchased 30 % of Bake Inc. (BI) for $ 10,000,000. The bookvalue of BI at July 1 was $ 24,000,000. BI has a patent that is not on their balancesheet which has an estimated fair value of $ 4,000,000 on July 1, 2021. The patenthad a remaining useful life of 5 years on July 1, 2021. BI also had inventory with abook value of $ 1,000,000 and a fair value of $ 2,000,000 on July 1, 2021. It has beendetermined that DC does have significant influence over BI beginning July 1, 2021. BI's income for the year ended December 31, 2021 was $ 4,000,000. This was earnedevenly over the year. In addition BI paid dividends of $ 300,000 each on March 31,June 30, September 30 and December 31, 2021 to their shareholders of records onthat date. The inventory on July 1, 2021 was 75% sold as of December 31, 2021.Required.For the investment in AI1. Using IFRS 9 prepare the journal entries for DC for all of 2021.2. Using ASPE prepare the journal entries for DC for all of 2021.For the investment in BI3. Using IFRS prepare the journal entries for DC for 2021.4. Using ASPE prepare the joumal entries for DC for 2021 for all optionsavailable under ASPE.

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Answered: 1. Using IFRS 9 prepare the journal…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 54CE

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1. Using IFRS 9 prepare the journal entries for DC for all of 2021. 2. Using ASPE prepare the journal entries for DC for all of 2021.