2. Chapter 11 Manitoba & Saskatchewan Corp Solutions

2. Chapter 11 Manitoba & Saskatchewan Corp...

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ADM 3340A/B Intermediate Accounting 11 Fall 2008 AVAILABLE FOR SALE (AFS) INVESTMENTS EQUITY AFS - MANITOBA CORPORATION Question No. 1 On November 3, 2007 Manitoba Corporation purchased for cash common shares of three companies and classified them as available for sale. These holdings do not give Manitoba Corporation significant influence over the strategic decisions of any of the investee companies. Therefore, these investments are non-strategic investments. The purchases were as follows: Fair value and cost at acquisition Nova Industries Ltd. $259,700 Columbia Soup Corp. 317,500 St. Boniface Pulp Ltd. 141,350 Total $718,550 Manitoba paid a commission of $7,500 in acquiring these shares and follows a policy of expensing transaction costs. On December 6, 2007, Manitoba received a cash dividend of $4,200 on its investment in the common shares of Columbia Soup. On December 31, 2007, Manitoba’s investment portfolio had the following fair values: Fair value on December 31, 2007 Nova Industries Ltd. $275,000 Columbia Soup Corp. 304,000 St. Boniface Pulp Ltd. 104,000 Total $683,000 On January 23, 2008, Manitoba sold all of its shares of Nova Industries Ltd. receiving gross proceeds of $287,220 On December 31, 2008, Manitoba’s investment portfolio had the following fair values: Fair value on December 31, 2008 Columbia Soup Corp. 362,550 St. Boniface Pulp Ltd. 139,050 Total $501,600 Required: Prepare journal entries to record the above events and show how Manitoba Corporation’s 2007 and 2008 balance sheet and statements of income, comprehensive income and changes in OCI are reported to the extent of the information available.
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ADM 3340A/B Intermediate Accounting 11 Fall 2008 AVAILABLE FOR SALE (AFS) INVESTMENTS EQUITY AFS - MANITOBA CORPORATION SOLUTION November 3, 2007 Investment in Nova Industries Ltd. 259,700 Investment in Columbia Soup Corp. 317,500 Investment in St. Boniface Pulp Ltd. 141,350 Commission Expense 7,500 Cash 726,050 December 6, 2007 Cash 4,200 Dividend revenue 4,200 December 31, 2007 Investment in Nova Industries Ltd. 15,300 Holding Loss - Columbia Soup Corp. 13,500 Holding Loss - St. Boniface Pulp Ltd. 37,350 Holding gain - Nova Industries Ltd. 15,300 Investment in Columbia Soup Corp. 13,500 Investment in St. Boniface Pulp Ltd. 37,350 Carrying Amount (Cost) - Nov 3/07 Fair Value Dec 31/07 Holding Gain/(Loss) Nova Industries Ltd. $259,700 $275,000 $15,300 Columbia Soup Corp. 317,500 304,000 (13,500) St. Boniface Pulp Ltd. 141,350 104,000
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2. Chapter 11 Manitoba & Saskatchewan Corp...

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