On January 3, 2020, MartinezLimited purchased3,500(35%) of the common shares of Sonja Corp. for $461,950. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition:
Assume that the 35% interest is enough to make Sonja an associate of Martinez, and that Martinez is required to apply IFRS for its financial reporting. The fair value of Sonja's shares at December 31, 2020, is $151 per share.
Prepare necessary journal entries associated with Martinez's investment in Sonja for 2020. Depreciable assets are depreciated on a straight-line basis.
Prepare the journal entry if you were informed that Martinez's long-term business prospects had deteriorated and that the most Martinez could expect to recover in the future or to sell its investment in Sonja for at December 31, 2020, is $116 per share.
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