Quinter Corp. (QC) was formed in April 20X5 and funded by five shareholders that are public companies. As
such, the shareholders are requiring that QC adopt IFRS even though it is a private company. QC was formed to
hold a variety of investments. Quinter looks for share and bond investments that are undervalued. Some of the
investments are purchased for resale at some future date and others are held to collect cash flows. In its first year
of operation, QC made four different investments.
You, the new accountant, have been hired to prepare Quinter’s accounting records since prior to this date,
accounting information may not have been posted correctly. It is now 5 January 20X6 and Quinter had its first
fiscal year end of 31 December 20X5. You have recently left a meeting with the VP Finance, who is your boss.
He has asked you to review the four investments made to date and to prepare a discussion of the choices he
is considering for reporting each of these investments. For each investment, discuss the potential impact on the
statement of financial position and net profits, along with the impact on the company’s ROA (Return on Assets)
before income taxes, using the financial information provided. Selected financial data for the forecasted results to
31 December 20X5 has been provided in Exhibit 1. Exhibit 2 summarizes the investments purchased to date.

EXHIBIT 1

SELECTED FINANCIAL INFORMATION

Forecasted amounts to 31 December 20X5

Net earnings before any investment revenue and income taxes ........................  $100,000

Other comprehensive income before any adjustments for investments ........... nil 

Total assets excluding investment assets .............................................................. $1,000,000

EXHIBIT 2

DETAILS OF INVESTMENTS

1. On1 July 20X5, purchased $6,000,000 face value bonds of Paper Inc. for $6,634,520. The bonds pay interest at 6% semi-annually. The current market rate for similar bonds at the time of the purchase of the bonds was 4%. The bonds mature on 1 July 20X11. At 31 December 20X5, the bonds had a fair market value of 105. The company is considering whether or not to classify these bonds as AC or FVOCI-Bonds.
2. On 1 August 20X5, purchased $5,000,000 convertible bonds of Book Co. The bonds pay interest at 3% semi-annually and are convertible into 200,000 common shares of Book Co. at a conversion price of $25 per share. The bonds mature in August 20X9. The bonds were purchased for $5,400,000. At 31 December 20X5, these bonds have a market value of $5,700,000.

3. On 30 September 20X5, purchased 40,000 common shares of Wave Corp. for $75.60 each. At 31 December 20X5, the shares were trading at $89.70 each. These shares are held for trading purposes only. Dividends totalling $45,000 were received on December 12, 20X5.
4. On 15 October 20X5, purchased 80,000 preferred shares of Beach Inc. for $55.00 each. The preferred shares have a cumulative annual dividend of $2.50 per share. There were no dividends declared or received during 20X5. At 31 December 20X5, the shares were trading at $52.00 each.

Required:

Prepare the requested report for the VP Finance. He is particularly interested in which classification choices will pro vide the company with the highest ROA before income taxes. To discuss this, for each investment calculate the closing balance of each investment at 31 December 20X5 and any related income for 20X5 for each alternative discussed. Calculate the ROA for each alternative for each investment. Make a final recommendation.