The following information is available about Kao Corp.?s investments at December 31, 2020. This is the first year Kao has purchased securities for investment purposes.

Assume that Kao Corp. follows IFRS.

Instructions

a. Prepare the adjusting entry(ies), if any, at December 31, 2020, assuming the investments are acquired for trading purposes and accounted for using the FV-NI model with no separate reporting of dividends and other types of FV-NI investment income and losses.

b. Prepare the adjusting entry(ies), if any, at December 31, 2020, assuming the investments are accounted for using the FV-OCI model.

c. Discuss how the amounts reported in the financial statements are affected by the choice of accounting method.

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Securities 3,000 shares of Petra Corporation common shares 1,000 shares of Dugald Inc. preferred shares Fair Value Cost $40,000 25,000 $46,000 22,000 $65,000 $68,000