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4 Satsuma Berhad bought 8% of Natural Herb's ordinary shares for RM 210 million on 2 January 2020. Under general conditions, the shares would be
4 Satsuma Berhad bought 8% of Natural Herb's ordinary shares for RM 210 million on 2 January 2020. Under general conditions, the shares would be categorized by Satsuma as a Fair Value through Other Comprehensive Income (FVOCI). However, Satsuma elected the fair value option for the investment. On 31 December 2020, the fair value of the shares held by Satsuma was RM215 million. Meanwhile, Natural Herb's nett income for the year ended 31 December 2020 was RM320 million. Dividend declared by Natural Herb during 2020 was RM80 million. Required: (a) Explain how the investment would be classified in Satsuma's Statement of Financial Position (i.e. as Fair Value through Other Comprehensive Income (FVOCI), Fair Value through Profit or Loss (FVPL), or Amortized Cost (AC)) in accordance with the provisions in MFRS 9. (b) Provide the journal entries during the year 2020 to account for the transactions. (c) Discuss the effect of this investment on 2020 income before taxes
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