Harnish Inc. acquired 25% of the outstanding common shares of Gregson Inc. on December 31, 2019. The purchase price was $1,250,000 for 62,500 shares, and is equal to 25% of Gregson’s carrying amount. Gregson declared and paid a $0.75 per share cash dividend on June 15 and again on December 15, 2020. Gregson reported net income of $520,000 for 2020. The fair value of Gregson’s shares was $21 per share at December 31, 2020. Harnish is a public company and applies IFRS.

Instructions

a. Prepare the journal entries for Harnish for 2019 and 2020, assuming that Harnish cannot exercise significant influence over Gregson. The investment is accounted for using the FV-OCI model.

b. Prepare the journal entries for Harnish for 2019 and 2020, assuming that Harnish can exercise significant influence over Gregson.

c. What amount is reported for the investment in Gregson shares on the December 31, 2020 statement of financial position under each of these methods in parts (a) and (b), and where is the investment reported on this statement?

d. What amount is reported on Harnish’s statement of comprehensive income in 2020 under each of these methods, and where are the amounts reported?