Additional Problem 9 Culver Ltd. is a Canadian publicly-traded business with a D
ID: 2512790 • Letter: A
Question
Additional Problem 9
Culver Ltd. is a Canadian publicly-traded business with a December 31 fiscal year end. In order to get a better return on some of its excess cash, Culver purchased 270 common shares of AFS Corporation on July 1, 2017 at a price of $4 per share. On the day of acquisition, Culver elected to account for the investment using the fair-value through other comprehensive income (FV-OCI) with recycling model. On August 1, 2017, AFS declared dividends of $1/share, and paid those dividends on August 20, 2017. On December 31, 2017, shares in AFS were trading at $6 per share. On September 15, 2018, Culver sold the shares in AFS for $8 per share.
Prepare the journal entries required to record the above transactions on the books of Culver Ltd assuming that the company is continuing to follow IAS39 standards for investments.(Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
(To adjust to current fair value)
(To record the sale of shares)
(Reclassification adjustment with recycling)
Date
Account Titles and Explanation
Debit
Credit
July 1, 2017August 1, 2017August 20, 2017December 31, 2017September 15, 2018
July 1, 2017August 1, 2017August 20, 2017December 31, 2017September 15, 2018
July 1, 2017August 1, 2017August 20, 2017December 31, 2017September 15, 2018
July 1, 2017August 1, 2017August 20, 2017December 31, 2017September 15, 2018
July 1, 2017August 1, 2017August 20, 2017December 31, 2017September 15, 2018
(To adjust to current fair value)
(To record the sale of shares)
(Reclassification adjustment with recycling)
Explanation / Answer
Solution:
Journal Entries - Culver Ltd Date Particulars Debit Credit 1-Jul-17 Investment in AFS Corporation - Available for Sale Dr $1,080.00 To Cash $1,080.00 (Being investment made in share of AFS corporationg and classified undr available for sale category) 1-Aug-17 Dividend receivables Dr $270.00 To Dividend Revenue $270.00 (Being dividend receivable on AFS investment) 20-Aug-17 Cash Dr $270.00 To Dividend Receivables $270.00 (Being dividend received) 31-Dec-17 Fair Value adjustment Dr $540.00 To Unrealized holding gain or loss - Income (OCI) $540.00 (Being fair value adjustment on AFS shares) 15-Sep-18 Cash Dr $2,160.00 Unrealized holding gain or loss - Income (OCI) Dr $540.00 To Investment in AFS Corporation - Available for Sale $1,080.00 To Fair value adjustment $540.00 To Gain on sale of investment $1,080.00 (Being investment sold and gain recognized)Related Questions
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