Arantxa Corporation made the following purchases of investments during 2014, the first year in which Arantxa invested in equity securities:
1. On January 15, purchased 9,000 shares of Nirmala Corp.'s common shares at $33.50 per share plus commission of $1,980.
2. On April 1, purchased 5,000 shares of Oxana Corp.'s common shares at $52.00 per share plus commission of $3,370.
3. On September 10, purchased 7,000 shares of WTA Corp.'s preferred shares at $26.50 per share plus commission of $2,910.
On May 20, 2014, Arantxa sold 3,000 of the Nirmala common shares at a market price of $35 per share less brokerage commissions of $2,850. The year-end fair values per share were as follows: Nirmala $30; Oxana $55; and WTA $28. The chief accountant of Arantxa tells you that Arantxa Corporation holds these investments with the intention of selling them in order to earn short-term profits from appreciation in their prices and accounts for them using the fair value though net income model, with no separate reporting of dividends and other types of FV-NI investment income and losses.
Assume that Aranrxa Corporation follows IFRS, and specifically IAS 39.
Instructions
(a) Prepare the journal entries to record the three investments.
(b) Prepare the journal entry(ies) for the sale of the 3,000 Nirmala shares on May 20.
(c) Prepare the adjusting entries needed on December 31, 2014.
(d) Repeat parts (a) to (c), assuming the investments are accounted for using the fair value through other comprehensive income model with recycling. Arantxa's policy is to capitalize transaction costs on the acquisition of FV-OCI investments and reduce the proceeds on disposal.
(e) How would your entries in (d) change, if at all, if Arantxa adopted IFRS 9 in 2014 to account for its financial asset investments?