QUESTION 3: ACCOUNTING FOR FINANCIAL INSTRUMENTS 1. Abacus Property Ltd bought shares in Texas Instruments on...
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QUESTION 3: ACCOUNTING FOR FINANCIAL INSTRUMENTS 1. Abacus Property Ltd bought shares in Texas Instruments on 15 August 2017 for $87,000. The intent of this investment was to make a gain. On 1 January 2020 the shares had a fair value and were recorded at $101,000. By the end of the year their fair value had fallen to $47,000. Record the appropriate journal entries for the year ending 31 December 2020. Account Account Type in any workings or justifications to the journal entries here Debit (TOTAL: 10 MARKS) Debit Credit Credit 2. Abacus Property Ltd also bought government bonds of the Kingdom of Enchancia for $2,000,333 accounted for using amortised cost on 1 January 2020. Due to uncertainty around royal succession, Abacus estimates that there is a 5% chance of default in the next 12 months which would result in a cash shortfall of $1,800,000 and a 10% chance of cash shortfall of $1,000,000. Record the appropriate journal entries for the year ending 31 December 2020. (3 marks) Account Account Type in any workings or justifications to the journal entries here Debit Debit Credit Credit 3. Following from 2 above, explain how this differs from the measurement of most other accounting values and whether you view this as consistent with the conceptual framework. (5 marks) Type in your answer here QUESTION 3: ACCOUNTING FOR FINANCIAL INSTRUMENTS 1. Abacus Property Ltd bought shares in Texas Instruments on 15 August 2017 for $87,000. The intent of this investment was to make a gain. On 1 January 2020 the shares had a fair value and were recorded at $101,000. By the end of the year their fair value had fallen to $47,000. Record the appropriate journal entries for the year ending 31 December 2020. Account Account Type in any workings or justifications to the journal entries here Debit (TOTAL: 10 MARKS) Debit Credit Credit 2. Abacus Property Ltd also bought government bonds of the Kingdom of Enchancia for $2,000,333 accounted for using amortised cost on 1 January 2020. Due to uncertainty around royal succession, Abacus estimates that there is a 5% chance of default in the next 12 months which would result in a cash shortfall of $1,800,000 and a 10% chance of cash shortfall of $1,000,000. Record the appropriate journal entries for the year ending 31 December 2020. (3 marks) Account Account Type in any workings or justifications to the journal entries here Debit Debit Credit Credit 3. Following from 2 above, explain how this differs from the measurement of most other accounting values and whether you view this as consistent with the conceptual framework. (5 marks) Type in your answer here
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1 DR Decrease in Fair Value Income Statement 54000 CR Financial AssetFinancial Financial Liability S... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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