On December 31, 2019, Acker Ltd. reported the following statement of financial position.?

The accumulated other comprehensive income was related only to the company?s non-traded equity investments. Some of these were sold in 2020 for cash, resulting in a gain on disposal of $30,000.

The fair value of Acker Ltd.?s investments at December 31, 2020, was $185,000 and their cost was $140,000. No FV-OCI investments were purchased during 2020. Although Acker is a private company, it applies IFRS and does not recycle OCI gains and losses for equity investments to net income when realized. The company reclassifies gains and losses to Retained Earnings when the FV-OCI investments are sold.

Acker Ltd. received dividend income of $5,000 (cash) during 2020 and realized a gain of $40,000 on the purchase and sale of FV-NI investments.

Instructions

Ignoring income taxes and assuming that all transactions during the year were for cash:

a. Prepare the journal entry related to the sale of the FV-OCI investments in 2020.

b. Prepare any reclassification entry for the unrealized gains or losses on the FV-OCI investments sold during the year ended December 31, 2020.

c. Prepare the year-end adjusting entry recognizing any adjustment in fair value for the FV-OCI investments.

d. Calculate net income and prepare a statement of comprehensive income for 2020. Ignore income taxes.

e. Prepare a statement of financial position as at December 31, 2020.

f. Digging Deeper Assume that Acker Ltd. applies ASPE and management had identified the equity investment as an FV-NI investment when it was first acquired. Identify and explain any differences in the opening SFP at December 31, 2019, the 2020 statement of net income, and the closing SFP at December 31, 2020, when the FV-NI method is used instead of the method used under the original IFRS assumption.

g. Prepare a statement of financial position as at December 31, 2020, based on the assumption in part (f).

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ACKER LTD. Statement of Financial Position As at December 31, 2019 Assets Equity Contributed capital Accumulated other comprehensive income FV-OCI investments Cash $240,000 $260,000 30,000 Total $290,000 $290,000