Intermediate Accounting, 17th Edition
17th Edition
ISBN: 9781119503682
Author: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Publisher: WILEY
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Sky Ltd (Sky) has purchased an investment of 15,000 shares on 1 August 2019 at a cost of $6.5 each. Transaction costs on the purchase amounted to $1,500. As at the year ended 30 September 2019, these shares are now worth $7.75 each. Sky makes an irrevocable election at initial recognition to measure these shares at fair value through other comprehensive income to reduce accounting mismatch.
Required: What is the effect on the statement of profit or loss and other comprehensive income of these shares for the year ended 30 September 2019 of Sky in accordance with HKFRS 9 ‘Financial Instruments’?
A. $17,250 gain in other comprehensive income
B. $18,750 gain in other comprehensive income and $1,500 expense
C. $17,250 gain in profit or loss and $1,500 expense
D. $18,750 loss in other comprehensive income and $1,500 expense
Senario
The company is desirous of comparing serval financial transactions and possible outcomes to assist in guiding its decision-making process. It is assumed that the company will be formed on January 1, 2021 and registered as Osbourne Corporation. The company’s charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. You are to prepare the company’s journal entries and statement of owner’s equity based on the following information
Issued 80000 shares of common stock. Stock has par value of 0.50 per share and was issued at $30 per share.
Issued 12000 shares of preferred stock at par value as payment in exchange for legal services.
Earned Net income of $82,0000.
Paid dividends to preferred shareholders as well as $2 per share to common stockholders
Requirement:
Using the information above and as a guide to answer following Questions
A. Prepare the journal entries with narrations to record the following:
The…
An investor company purchased 180,000 shares of common stock of the investee company on January 2, 2021. The investee company had 500,000 shares of common stock outstanding during 2021, declared and paid cash dividends of $241,000 during 2021, and reported net income of $738,000 for 2021. If the investor company uses the equity method of accounting for its investment in the investee company, the investor company should report revenue from investment (or Investment Income) for 2021 in the amount of $___________________. (Do not round your answer for any part of the computation.)
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