Farzad Corp. (Farzad), a public company, had the following transactions relating to financial assets during its fiscal

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Question:

Farzad Corp. (Farzad), a public company, had the following transactions relating to financial assets during its fiscal year ended December 31, 2020:

• On January 2, 2020, Farzad purchased bonds from Akram Inc. with a face value of $100,000. The bond matures on December 31, 2032, and pays interest semi-annually on June 30 and December 31 at 4.6% per annum. NO transaction costs were incurred on this purchase. The bonds were purchased to yield 5%. The bond was classified as amortized cost. • On January 15, 2020, Farzad purchased 1,500 shares of Elysium Inc. at a price of $67 per share. The shares were classified as fair value through profit or loss (FVPL).

• On February 2, 2020, Farzad sold all of the 2,000 shares of Benny Ltd. it owned for $45 per share. These shares were purchased in 2018 at a total price of $72,000. The carrying value of these shares as at December 31, 2019, was $83,000. The shares were classified as fair value through other comprehensive income-elect (FVOCI-elect)

• On June 30, 2020, Farzad received interest on the Akram Inc. bonds.

• On July 15, 2020, Farzad purchased 8,000 common shares of Cardall Corp. for a price of $13 per share, plus total transaction costs of $2,800. The shares were classified as FVOCI-elect.

• On October 12, 2020, Farzad sold all of the 2,200 shares of Long Ltd. it owned for $86 per share. These shares were purchased in 2018 at a total price of $125,000. The carrying value of the shares at December 31, 2019, was $187,000. The shares were classified as FVPL.

• On December 31, 2020, Farzad received interest on the Akram Inc. bonds. At this time, the Akram Inc. bonds were trading at 105% of the face value.

• At December 31, 2020, the fair values of the Elysium Inc. and Cardall Corp. shares were $52.00 per share and $14.20 per share, respectively. Required:

a) Prepare the journal entries to record all of Farzad’s investment-related transactions for 2020. (10 marks)

b) Prepare the journal entries necessary to account for the fair value changes on Farzad’s financial assets at December 31, 2020.