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163. In early December of 2016, Blue Corp. purchased $40,000 of

Question : 163. In early December of 2016, Blue Corp. purchased $40,000 of : 1412849

 

 

163.

In early December of 2016, Blue Corp. purchased $40,000 of Yellow Company common stock, which constitutes less than 3% of Yellow's outstanding shares. Blue accounts for the Yellow investment as available for sale. By December 31, 2016, the value of the Yellow investment had fallen to $30,000, and Blue recorded an unrealized loss. By December 31, 2017, the value of the Yellow investment had fallen to $15,000, and Blue determined that it can no longer assert that it has both the intent and ability to hold the shares long enough for their fair value to recover, so Blue recorded an OTT impairment. By December 31, 2018, fair value had recovered to $20,000.

Prepare appropriate entry(s) at December 31, 2016, and indicate how the scenario will affect net income, OCI, and comprehensive income.


 
 

 

Blue must record an unrealized loss of $10,000 to account for the fact that the fair value of Yellow's shares has fallen from the original cost of $40,000 to $30,000
 

 

 

 

 

164.

In early December of 2016, Blue Corp. purchased $40,000 of Yellow Company common stock, which constitutes less than 3% of Yellow's outstanding shares. Blue accounts for the Yellow investment as available for sale. By December 31, 2016, the value of the Yellow investment had fallen to $30,000, and Blue recorded an unrealized loss. By December 31, 2017, the value of the Yellow investment had fallen to $15,000, and Blue determined that it can no longer assert that it has both the intent and ability to hold the shares long enough for their fair value to recover, so Blue recorded an OTT impairment. By December 31, 2018, fair value had recovered to $20,000.
Prepare appropriate entry(s) at December 31, 2017, and indicate how the scenario will affect net income, OCI, and comprehensive income.  
 
 

 

 

 

 

165.

In early December of 2016, Blue Corp. purchased $40,000 of Yellow Company common stock, which constitutes less than 3% of Yellow's outstanding shares. Blue accounts for the Yellow investment as available for sale. By December 31, 2016, the value of the Yellow investment had fallen to $30,000, and Blue recorded an unrealized loss. By December 31, 2017, the value of the Yellow investment had fallen to $15,000, and Blue determined that it can no longer assert that it has both the intent and ability to hold the shares long enough for their fair value to recover, so Blue recorded an OTT impairment. By December 31, 2018, fair value had recovered to $20,000.
Prepare appropriate entry(s) at December 31, 2018, and indicate how the scenario will affect net income, OCI, and comprehensive income. 
 
 

 

 

 

 

 

166.

Stanhope Associates accounts for the following investments under IFRS No. 9:

1. 10 shares of Blackstone equity, held for long-term investment, no election of FVOCI.
2. 10 shares of Erickson equity, held for risk management, election to classify as FVOCI.
3. 10 shares of AT&E equity, held for immediate resale.
4. 10 bonds (consisting of only interest and principal) issued by Filo Inc., held for long-term collection of cash flows.
5. 10 bonds (consisting of only interest and principal) of SimSung, held for risk management but also might be sold.
6. 10 bonds (consisting of only interest and principal) issued by Attachi, held for immediate resale.

Required:

For each investment, indicate: (a) the accounting approach that will be used to account for the investment, and briefly explain why that approach is appropriate, and (b) the effect on earnings of an increase in the fair value of the investment in the period following acquisition of the investment, assuming that Stanhope does not sell the investment. You may group the specific investments if they have the same answers. Identify the investments you are including in the group.


 
 

 

 

 

 


 

 

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