On December 31, 2019, Templeton Limited owned the following investments that were accounting
for using the FV–NI model. Templeton follows the IFRS standards.
Description Quantity Total Cost Market Value
General Motors - common shares 100 shares $ 5,000 $52 per share
Shell Canada - common shares 200 shares $ 6,000 $25 per share
The following transactions took place in 2020:
Jan 1 Purchased 2,000 of the 8,000 outstanding common shares of Brand Corporation for
$20,000 cash. It is the intention of management to hold these shares as a long-term
investment.
Feb 1 Purchased 2 (two) $50,000, 5-year face value bonds of Bell Canada @ $108,111 plus
accrued interest. These 10% bonds pay interest each July 1 and January 1. The market
rate in effect on this date was 8%. These bonds are to be accounted for using the FV–NI
model and interest is not recorded separately.
Mar 1 Sold 50 shares of General Motors for total proceeds of $3,100.
May 1 Purchased 100 common shares of Shell Canada in exchange for land that cost $3,500 and had
an estimated fair value of $3,000. The shares were trading @ $28 on May 1 and the broker
charged a fee of $120.
June 1 Sold 100 common shares of Shell Canada @ $24 per share.
July 1 Received the semi-annual interest payment from the Bell Canada bonds.
Aug 1 Sold one of the $50,000 Bell Canada bonds for 98% plus accrued interest
Sept 1 Received a $5 per share cash dividend on the General Motors shares and $2 per share
cash dividend on the Shell Canada shares. (Dividend income is not recorded separately)
Oct 1 Purchased $40,000 of the 8% bonds of Greenbay Limited for $43,412 plus accrued interest.
The market rate of interest on investments of a similar type was 6% on Oct. 1. These bonds
pay interest each June 30 and December 31 and will mature on June 30, 2025. It is the
intention of management to hold this bond until maturity and therefore account for this
investment using the amortized cost model.
Dec 30 Received a $2 per share cash dividend on the Brand Corporation shares.
Dec 31 Received semi-annual interest on the Greenbay Limited bond.
Dec 31 Brand Corporation’s financial statements for the year ended Dec. 31, 2020
indicated the following results of operations:
Net Income $17,000Fall 2020 [email protected]
Dec 31 The market values of the company's investments were as follows:
General Motors $ 57.50 per share
Shell Canada 28.00 per share
Speedy Corporation 35.00 per share
Brand Corporation 12.00 per share
Greenbay Limited 96.5 per share
Required:
(a) Prepare journal entries to record all of the transactions for 2020.
(b) Prepare all of the necessary year-end adjusting entries as at December 31, 2020.
Answers
Answer:
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