Coltrane Inc. was created on January 2, 20x5. Coltrane Inc. operates a jazz recording studio. The following summary transactions occurred during the year ended December 31, 20x5:

1. The owner of the company, Jack Coltrane invested $400,000 of his own money into the company in exchange for common shares.
2. Borrowed $500,000 from a local bank on January 31, 20x5. The interest on the loan is 6% and interest is payable annually each January 31^st.
3. On February 28, 20x5, purchased and renovated a studio at a cost of $500,000. The expected useful life of the studio is 40 years with no residual value.
4. On March 31, 20x5, purchased studio recording equipment on account in the amount of $300,000. The equipment has a useful life of 10 years with no residual value.
5. On March 31, 20x5 purchased and paid for a two-year comprehensive insurance policy on the building and equipment at a cost of $6,000.
6. Purchased supplies of $5,600 during the year. By the end of the year, there were $1,200 of supplies remaining.
7. Total billings to customers using the studio during the year totaled $350,000. By the end of the year, $290,000 of this amount was collected. Jack believes that of the remaining $60,000 owing, he will be able to collect $50,000.
8. Total expenses for the year totaled $260,000. At the end of the year, all of these were paid with the exception of $25,000 of invoices. (Use a generic Expenses account to record these).

Required -

a) Prepare journal entries to record the above. For each entry, if necessary, write the initial entry and then write an adjusting entry.

b) Prepare a Statement of Income for Coltrane Inc. for the year ended December 31, 20x5. You do not need to prepare T-Accounts to do this you should be able to put it together using the journal entries.

Problem 2 (7 marks) (14 minutes)

On June 30, 20x2, the Marsalis Company purchased $130,000 of the shares of Powell Inc. During the year, Marsalis received $3,000 of dividends of Powell Inc. At December 31, 20x2, the shares of Powell had a fair value of $110,000.

Required

a) Assume that Marsalis classifies the investment as Fair Value through Profit and Loss (FVTPL). Write the journal entries for the year ended December 31, 20x2,

b) Assume that Marsalis classifies the investment as Fair Value through Other Comprehensive Income (FVTOCI).

i) Write the journal entries for the year ended December 31, 20x2.

ii) Assume that Marsalis net income for the year ended December 31, 20x2 is $460,000. Prepare the bottom portion of the Statement of Comprehensive Income starting with the line Net Income.