a) MLF Inc. recently made a number of investments. The companys accountant is not very familiar with the requirements of IFRS 9 and has asked for your guidance on how the recent acquisitions should be reported in the companys financial statements.

1. Shares in GFF Inc : MLF purchased 10,000 shares of GFF, a publicly traded company, for the express purpose of reselling them in the short term to make a trading profit.

2. Shares in RPT Inc. MLF purchased 30,000 shares of RPT, a publicly traded company, as a long-term, passive investment. The company owners have indicated that they would prefer that the companys reported profit or loss not be affected by unrealized gains and losses on the investment.

3. Bonds issued by JF Inc.: MLF purchased $5 million in bonds issued by JF due in 20 years. Interest is payable annually at prime + 2%. The interest rate is fixed at the beginning of each year. MLFs business model for this asset is to hold the investment to collect its contractual cash flows.

4. Bonds issued by AWF Inc. :MLF purchased $2 million in 4.5% bonds issued by AWF that mature in five years. MLFs business model for this investment is to hold it to collect contractual cash flows. To finance the purchase of the bonds, MLF borrowed $2 million from its bank. The interest rate on the loan is fixed at 4% for five years.

5. Mortgages MLF Inc. bought a portfolio of mortgages from a building society. The mortgages are due to be repaid over the next 15 to 20 years. Due to current economic conditions, the mortgages were acquired at a substantial discount to their book value. The company intends to sell the mortgages for a profit when the underlying economic conditions improve. During the holding period, the company will receive principal and interest. MLFs business model for this investment is to sell it at an opportune time while collecting contractual cash flows in the interim.

Required: Explain how each of the financial assets should be reported in MLFs financial statements. Also give rationale to your answer

b) On January 1, 20X5, We Have Money Corp. (WHMC) made a number of investments, as detailed below:

a) The company acquired 300,000 common shares in Potash Consortium Inc. for $5 cash per share. This shareholding is a passive investment. WHMCs management did not make any specific elections with respect to the classification of this investment.

b) WHMC purchased 10,000, $25, 4% preferred shares in Quitzau Inc. for $250,000. WHMC irrevocably elects to classify this investment at FVOCI-elect.

c) WHMC paid $4,887,718 for $5 million 3.5% semi-annual bonds issued by Sangria Corp. that mature in five years. The objective of the companys business model for this type of asset is to hold the investment for the purpose of collecting the contractual cash flows.

Consider the following additional information:

On July 1, 20X5, WHMC received an $87,500 interest payment on the Sangria bonds. The next interest payment is due on January 1, 20X6.

On September 30, 20X5, WHMC received a $10,000 dividend on the Quitzau preferred shares.

On December 31, 20X5, WHMC received a $30,000 dividend on the Potash Consortium common shares.

The market value of the Potash Consortium common shares as at December 31, 20X5, was $4.95 per share.

The market value of the Quitzau preferred shares as at December 31, 20X5, was $26.00 per share.

The market value of the investment in the Sangria bonds as at December 31, 20X5, was $4,900,000.

WHMC has a December 31 year end. It does not prepare interim statements.

Required: Show the changes of Finical statement element of WHMC in 20X5 .