solutions-ch09

solutions-ch09 - EXERCISE 9-1 IFRS 9 Fair value through net...

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EXERCISE 9-1 IFRS 9 private entity standards 1. Fair value through net income (FV-NI) security since the company’s intent is to manage the changing fair values and sell the bonds as soon as the value increases. same 2. Fair value through other comprehensive income (FV-OCI) security. When the company acquires 20% or more, the investment will be reclassified to an equity investment if significant influence over Farm Corp. exists. Fair value through net income (FV- NI). (Private entity GAAP does not have an FV-OCI option.) 3. Fair value through other comprehensive income (FV-OCI) security or fair value through net income (FV-NI) Amortized cost, unless the company chooses the fair value through net income (FV-NI) model option. (Private entity GAAP does not have an FV-OCI option.) 4. Fair value through net income (FV-NI) security. (Under proposed IFRS, FV-OCI investments normally will be limited to equity investments in other companies.) Amortized cost, unless the company chooses the fair value through net income (FV-NI) model option. (Private entity GAAP does not have an FV-OCI option.) 5. Cost/amortized cost model security as it appears the company’s intent is to manage the stated cash flows and hold the bonds until maturity. Amortized cost, unless the company chooses the fair value through net income (FV-NI) model option. 6. Fair value through net income (FV-NI). Fair value through net income (FV- NI) assuming that the equity investment is quoted in an active market. Page 1 of 22
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EXERCISE 9-3 (a) January 1, 2011 Investment in Bonds. .............................. 537,907.40 Cash. ................................................. 537,907.40 (b) Schedule of Interest Income and Bond Premium Amortization Effective Interest Method 12% Bonds Sold to Yield 10% Date Cash Received Interest Income Premium Amorti- zation Carrying Amount of Bonds 01/01/11 12/31/11 12/31/12 12/31/13 12/31/14 12/31/15 $60,000 60,000 60,000 60,000 60,000 $53,790.74 53,169.81 52,486.80 51,735.48 50,909.77* $6,209.26 6,830.19 7,513.20 8,264.52 9,090.23* $537,907.40 531,698.14 524,867.95 517,354.75 509,090.23 500,000.00 *Adjusted due to rounding. (c) December 31, 2011 Cash. .............................................................. 60,000.00 Investment in Bonds. ............................ 6,209.26 Interest Income. ..................................... 53,790.74 (d) December 31, 2012 Cash. .............................................................. 60,000.00 Investment in Bonds. ............................ 6,830.19 Interest Income. ..................................... 53,169.81 (e) January 1, 2016 Cash. ......................................................... 500,000.00 Investment in Bonds. ...................... 500,000.00 Page 2 of 22
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EXERCISE 9-21 (a) 2011: Investment in Martz Limited. ........................... 180,000 Cash. ......................................................... 180,000 Cash ($20,000 X .30). ....................................... 6,000 Dividend Income. ..................................... 6,000
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This note was uploaded on 12/10/2010 for the course AFM 291 taught by Professor Clark during the Spring '10 term at Waterloo.

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solutions-ch09 - EXERCISE 9-1 IFRS 9 Fair value through net...

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