Question
Bridgeport Ltd. had the following investment portfolio at January 1, 2020: Investment Quantity Cost per Share Fair Value at Dec. 31, 2019 Earl Corp. 930
Bridgeport Ltd. had the following investment portfolio at January 1, 2020:
Investment | Quantity | Cost per Share | Fair Value at Dec. 31, 2019 | ||||||
Earl Corp. | 930 | $15.10 | $10.50 | ||||||
Josie Corp. | 900 | 20.10 | 15.50 | ||||||
Asher Corp. | 500 | 8.00 | 7.30 |
During 2020, the following transactions took place:
1. | On March 1, Josie Corp. paid a $2 per share dividend. | |
2. | On April 30, Bridgeport sold 300 shares of Asher Corp. for $10.10 per share. | |
3. | On May 15, Bridgeport purchased 200 more Earl Corp. shares at $16.10 per share. | |
4. | At December 31, 2020, the shares had the following market prices per share: Earl Corp. $17.10; Josie Corp. $19.10; and Asher Corp. $8.10. |
During 2021, the following transactions took place:
5. | On February 1, Bridgeport sold the remaining Asher Corp. shares for $7.10 per share. | |
6. | On March 1, Josie Corp. paid a $2 per share dividend. | |
7. | On December 21, Earl Corp. declared a cash dividend of $3 per share to be paid in the next month. | |
8. | At December 31, 2021, the shares had the following market prices per share: Earl Corp. $19.10 and Josie Corp. $21.10. |
1) Assuming that Bridgeport Ltd. is a publicly accountable enterprise that accounts for its investment portfolio at FV-OCI (with no recycling to net income), prepare journal entries to record all of the 2020 and 2021 transactions and year-end events.
2) Prepare the relevant parts of Bridgeport Ltd.s 2021 and 2020 comparative statements of financial position, statements of comprehensive income, and statements of changes in equity (accumulated other comprehensive income portion), and income statement where applicable, to show how the investments and related accounts are reported.
3) Assume that Bridgeport Ltd. is a private enterprise that applies ASPE and accounts for its investment portfolio at cost (that is, the securities do not have actively traded market prices). Determine the amount by which the companys 2020 net income and 2021 net income would differ from the amounts reported under the assumptions given above.
Account Titles and Explanation Debit Credit Date 2020 (To adjust to fair value at date of disposal) (To record disposal) (To reclassify holding gain) 2021 (To adjust to fair value at date of disposal) (To record disposal) (To reclassify holding loss) Bridgeport Ltd. Statement of Financial Position 2020 2021 Bridgeport Ltd. Statement of Comprehensive Income 2020 2021 $X $X + $X+ Bridgeport Ltd. Statement of Changes in Accumulated Other Comprehensive Income 2020 2021 2020 2021 Net Incomes The net income change
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