Doberdor International, Inc. (Doberdor) is a large multinational company listed on the TSX. On January 1, 20X1, Doberdor acquired in the open market 64,000 common shares of Boxerdoodle Corporation (Boxerdoodle) at a cost of $19.875 per share paying in cash a total purchase price of

$1,272,000. This investment gives management of Doberdor significant influence, but not control and not joint control, over the financial and operating policy decisions of Boxerdoodle.

The following tables show the information that you have collected from the audited financial statements of Boxerdoodle for the one year after the January 1, 20X1 acquisition date:

Balance Sheet

January 1, 20X1

December 31, 20X1

Assets:

Current assets Land Equipment (net)

$1,170,000 2,450,000

3,110,000

$1,230,000 2,190,000

3,730,000

Total

$6,730,000

$7,150,000

Liabilities and Equities

Current liabilities

$ 900,000

$1,100,000

Non-current liabilities

2,900,000

2,710,000

Common Shares (200,000 shares)

1,000,000

1,000,000

Retained Earnings

1,120,000

1,760,000

Accumulated Other Comprehensive Income

810,000

580,000

Total

$6,730,000

$7,150,000

Statement of Income and Comprehensive Income

Year ended December 31, 20X1

Revenue

$1,880,000

Expenses

1,270,000

Income (Loss) from Continuing Operations

$ 610,000

Income (Loss) from Discontinued Operations

180,000

Net Income (Loss)

$ 790,000

Other Comprehensive Income (Loss)

(230,000)

Total Comprehensive Income (Loss)

$ 560,000

Statement of Changes in Equity

Retained Earnings, Beginning balance

$1,120,000

Net Income (Loss)

790,000

Dividends

(150,000)

Retained Earnings, Ending balance

$1,760,000

Accumulated Other Comprehensive Income, Beginning balance

$ 810,000

Other Comprehensive Income (Loss)

(230,000)

Accumulated Other Comprehensive Income, Ending balance

$ 580,000

The following table shows the information you collected on the fair market values of all the identifiable assets and liabilities of Boxerdoodle as of two specific dates:

Fair Market Value

January 1, 20X1

December 31, 20X1

Current assets

$1,170,000

$1,230,000

Land

3,800,000

4,100,000

Equipment

3,710,000

3,930,000

Current liabilities

(900,000)

(1,100,000)

Non-current liabilities

(2,900,000)

(2,710,000)

Total

$4,880,000

$5,450,000

You have also collected the following additional information:

1.All land on hand with the net book value of $2,450,000 at January 1, 20X1 on the books of Boxerdoodle remained on hand and held by Boxerdoodle at December 31, 20X1.

2.All equipment on hand with the net book value of $3,110,000 at January 1, 20X1 on the books of Boxerdoodle had an estimated remaining useful life of 10 years as of January 1, 20X1 with estimated zero residual value. Boxerdoodle and Doberdor both use the straight-line depreciation method in the accounting of all their property, plant, and equipment assets.

2.The present value of the future cash flows expected to arise from dividends to be received from Boxerdoodle and from the ultimate disposal of the Boxerdoodle shares, on a per share basis, was estimated by management of Doberdor on December 31, 20X1 to be $29.00.

3.The common shares of Boxerdoodle were trading on the TSX at $28.125 on December 31, 20X1.

4.The dividends payable account on the books of Boxerdoodle had a zero balance at December 31, 20X1.

5.Both companies, Doberdor and Boxerdoodle, have a December 31 year end.

Required:

Prepare all necessary journal entries in 20X1 for Doberdor to account for its investment in the Boxerdoodle shares in accordance with the appropriate accounting standards. For each DEBIT and CREDIT entry, after the name of the account, indicate clearly whether the account is an "Income Statement" (I/S) account, an "Other Comprehensive Income" (OCI) account, or a "Balance Sheet" (B/S) account. Show supporting calculations. Assume all dollar amounts involved are material.

You are reminded that the requirement of indicating (I/S), (B/S), and (OCI) is essential and any DEBIT or CREDIT entry without such indication or with the incorrect indication will be given zero marks. You are also reminded that marks will be deducted for incorrect entries that should not be included but are included in your answer. These negative marks are necessary to impose penalties and discourage students from using the "shotgun approach" that involves including several variations of answers and hoping some of these variations will overlap with the answer key.