Question: On January 3 2014 Mega Limited purchased 3 000 shares 30

On January 3, 2014, Mega Limited purchased 3,000 shares (30%) of the common shares of Sonja Corp. for $438,000. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition:
During 2014, Sonja reported the following information on its statement of comprehensive income:
Income before discontinued operations ................. $200,000
Discontinued operations (net of tax) .................. (50,000)
Net income and comprehensive income ................ 150,000
Dividends declared and paid by Sonja, November 15, 2014 ........ 110,000
Assume that the 30% interest is sufficient to make Sonja an associate of Me go, and that Me go is required to apply IFRS for its financial reporting. The fair value of Sonja's shares at December 31, 2014, is $147 per share.
(a) Prepare the journal entry to record Mega’s purchase of the Sonja shares on January 3, 2014. (b) Prepare all necessary journal entries associated with Mega's investment in Sonja for 2014. Depreciable assets are depreciated on a straight-line basis.
(c) Would any of your entries in (b) change if you were informed that Mega's long-term business prospects had deteriorated and that the most Mega could expect to recover in the future or to sell its investment in Sonja for at December 31, 2014, is $115 per share? If so, prepare the entry and explain briefly.

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  • CreatedSeptember 18, 2015
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