Question

On August 1, 2017, Lourdes Inc. (Lourdes) purchased 20,000 preferred shares of Matagami Ltd. for $120 per share. The shares have a dividend of $12 per share and the shares must be repurchased by Matagami on or before November 30, 2023 for $120 per share. On December 31, 2017, Lourdes' year-end, the fair value of the shares was $95 per share. On December 31, 2017, Lourdes had total assets (excluding the investment in the preferred shares) of $35 million, total liabilities of $25 million and share capital of $4 million. In addition, Lourdes' revenues and expenses for 2017 (excluding all income statement effects related to the preferred shares) were $8,200,000 and $6,100,000 respectively. Retained earnings on January 1, 2017 was $6,060,000. The preferred dividends were paid on November 15, 2017.

Required:
a. Prepare a summarized balance sheet and income statement on December 31, 2017, assuming that Lourdes accounts for the shares as a
(i) Fair value through profit and loss,
(ii) Fair value through other comprehensive income, and
(iii) Amortized cost, and that Lourdes owned the shares on December 31, 2017.
b. Prepare a summarized balance sheet and income statement on December 31, 2017, assuming that Lourdes accounts for the shares as a
(i) Fair value through profit and loss,
(ii) Fair value through other comprehensive income, and
(iii) Amortized cost, assuming that Lourdes sold the shares on December 31, 2017, for $95 per share.



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  • CreatedFebruary 26, 2015
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