Case 4 (15 marks)

Presented below are three independent situations:

a. IKJUN Co. purchased 12% bonds having a maturity value of $100,000 for $107,581 on 1 January 2019. The bonds provide the bondholders with a 10% yield. They are dated January 2019, and mature January 1, 2024, with the interest received December 31 of each year. IKJUNs business model is to hold these bonds to collect contractual cash flows.

b. SONGHWA Co. acquired 10% of 100,000 ordinary shares of JEONGWON Co. at a total cost of $7 per share on March 16, 2019. On June 15, JEONGWON Co. declared and paid a $37,500 cash dividend. On December 31, JEONGWON Co. reported net income of $120,000 for the year. At December 31, the market price of JEONGWON Co. was $13 per share. The investment is classified as trading.

c. JUNWAN Co. obtained significant influence over SEOKHYEONG Co. by buying 25% of SEOKHYEONG Co.s 60,000 outstanding ordinary shares at a total cost of $10 per share on January 1, 2019. On July 20, SEOKHYEONG Co. declared and paid a cash dividend of $60,000. On December 31, SEOKHYEONG Co. reported a net income of $100,000 for the year. At December 31, the market price of SEOKHYEONG Co. was $20 per share.

Required: Prepare all necessary journal entries in 2019 for above situations and provide an explanation of your answer!