Question

Foreign Currency: On 14 June 20X9, Friedland Limited purchased 20,000 shares of Gerstan Limited for US$ 6.20 per share, plus US$ 1,700 in commis-sions and fees. The shares were purchased from a broker on account, with later cash payment. On 14 June 20X9, the exchange rate was US$ 1 = Cdn$ 1.09. The shares were held as a FVTPL investment. The account was settled with the broker on 1 August 20X9, when US$ 1 = Cdn$ 1.11. On 1 July 20X9, Friedland bought a US$ 1,000,000 five- year bond at par value, when the exchange rate was US$ 1 = Cdn$ 1.08. Friedland paid cash on the acquisition date. There was no accrued interest. Management classified this bond as a FVTPL investment. At 31 December 20X9, Gerstan shares had a quoted fair value of US$ 7 per share, the bonds were trading at 104, and the exchange rate was US$ 1 = Cdn$ 1.07.

Required:
1. Provide the journal entry to record purchase of the bond on 1 July.
2. Provide journal entries to record the acquisition of the Gerstan shares on 14 June, and payment to the broker in August.
3. Provide the 31 December 20X9 adjustment that must be made to reflect fair values and or exchange rate changes. No interest accrual need be made. Explain the components of the Gerstan adjustment.



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  • CreatedFebruary 17, 2015
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