An investment is considered as insignificant if the investment made by the investor is less than 20% in the investee company. The income on investments having insignificant influence is directly recorded in the income statement. To prepare: the adjusting entry to record the fair value adjustment for the equity securities.

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Chapter C, Problem 9E

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Concept Introduction:

An investment is considered as insignificant if the investment made by the investor is less than 20% in the investee company. The income on investments having insignificant influence is directly recorded in the income statement.

To prepare:the adjusting entry to record the fair value adjustment for the equity securities.

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Arantxa Corporation made the following purchases of investments during 2023, the first year in which Arantxa invested in equity securities: 1. 2. 3. On January 15, it purchased 9,000 shares of Nirmala Corp.'s common shares at $33.50 per share plus commission of $1,980. On April 1, it purchased 5,000 shares of Oxana Corp's common shares at $52 per share plus commission of $3,370. On September 10, it purchased 7,000 shares of WTA Corp's preferred shares at $26.50 per share plus commission of $2,910. On May 20, 2023, Arantxa sold 3,000 of the Nirmala common shares at a market price of $35 per share less brokerage commissions of $2,850. The year-end fair values per share were as follows: Nirmala $30, Oxana $55, and WTA $28. The chief accountant of Arantxa tells you that Arantxa holds these investments with the intention of selling them to earn short-term profits from appreciation in their prices and accounts for them using the FV-NI model. Arantxa follows IFRS.

If the combined market value of equity investment at fair value through profit or loss at the end of the year is more than the market value of the same portfolio of trading securities at the beginning of the year, the difference should be accounted for by: a debit to equity investment O reporting an unrealized loss in security investment in the stockholders' equity section of the balance sheet a footnote to the financial statements reporting an unrealized loss in security investments in the income statement O reporting an unrealized gain in security investments in the income statement

Which of the following statements is not true of the fair-value method of accounting for marketable securities? Select one: A. The investment account is recorded at current fair value on the balance sheet. B. Interim changes in the investments’ fair value may or may not affect income depending on the securities’ classification. C. This method is used when the reporting company generally owns less than 20% of the investee company. D. Dividends are treated as a return of the capital invested. E. None of the above