Question

The following information relates to the 2014 debt and equity invesm1ent transactions of Wildcat Ltd., a publicly accountable Canadian corporation. All of the investments were acquired for trading purposes and accounted for using the fair value through net income model with all transaction costs being expensed. No investments were held at December 31, 2013, and the company prepares financial statements only annually, each December 31, following IFRS 9. Dividend and interest income are not recorded or reported separately from other invesm1ent income accounts.
1. On February 1, the company purchased Williams Corp. 12% bonds, with a par value of $500,000, at 106.5 plus accrued interest to yield 10%. Interest is payable April 1 and October l.
2. On April 1, semi-annual interest was received on the 'Williams bonds.
3. On July 1, 9% bonds of Saint Inc. were purchased. These bonds, with a par value of $200,000, were purchased at 101 plus accrued interest to yield 8.5%. Interest dates are June 1 and December l.
4. On August 12, 3,000 shares of Scotia Corp. were acquired at a cost of $59 per share. A 1% commission was paid.
5. On September 1, Williams Corp. bonds with a par value of $100,000 were sold at 104 plus accrued interest.
6. On September 28, a dividend of $0.50 per share was received on the Scotia Corp. shares.
7. On October 1, semi-annual interest was received on the remaining Williams Corp. bonds.
8. On December 1, semi-annual interest was received on the Saint Inc. bonds.
9. On December 28, a dividend of $0.52 per share was received on the Scotia Corp. shares.
10. On December 31, the following fair values were determined: 'Williams Corp. bonds 101.75; Saint Inc. bonds 97; and Scotia Corp. shares $60.50.
Instructions
(a) Prepare all 2014 journal entries necessary to properly account for the investment in the Williams Corp. bonds.
(b) Prepare all 2014 journal entries necessary to properly account for the investment in the Saint Inc. bonds.
(c) Prepare all 2014 journal entries necessary to properly account for the investment in the Scotia Corp. shares.
(d) Assume that there were trading investments on hand at December 31, 2013, accounted for using the fair value through net income model, and that they consisted of shares with a cost of $400,000 and a fair value of $390,000. These non-dividend-paying shares were sold early in 2014 and their original cost was recovered exactly. What effect would this transaction have on 2014 net income?
(e) Assume that the interest income on the Saint Inc. bonds that were purchased on July 1, 2014, was separately tracked and reported. Prepare the entries that are required on July 1, December 1, and December 31, 2014, to account for this investment.


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  • CreatedSeptember 18, 2015
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