Exercise 9-25

On January 1, 2020, Culver Corporation purchased 30% of the common shares of Martz Limited for $197,000. Martz Limited shares are not traded in an active market. The carrying amount of Martzs net assets was $530,000 on that date. Any excess of the purchase cost over Culvers share of Martzs carrying amount is attributable to unrecorded intangibles with a 20-year life. During the year, Martz earned net income and comprehensive income of $79,000 and paid dividends of $15,800. The investment in Martz had a fair value of $202,000 at December 31, 2020. During 2021, Martz incurred a net loss and comprehensive loss of $84,000 and paid no dividends. At December 31, 2021, the fair value of the investment was $141,000 and the recoverable amount was $150,000. Assume that Culver follows IFRS.

A. Prepare all relevant journal entries related to Culvers investment in Martz for 2020 and 2021, assuming this is its only investment and Culver cannot exercise significant influence over Martzs policies. Culver accounts for this investment using the FV-NI model and separately records and reports each type of income (loss) separately.

Account Titles and Explanation	Debit	Credit
2020:
(To record investment purchase)
(To record collection of dividend)
(To record fair value adjustment)
2021:

B. Illustrate how the statement of comprehensive income is affected in 2020.

Net income will include the

dividend revenueFV-NI investmentscashunrealized loss

of $

and the

cashunrealized lossunrealized gainFV-NI investments

of $

C. Illustrate how the statement of comprehensive income is affected in 2021.

D. Prepare all relevant journal entries related to Culvers investment in Martz for 2020 and 2021, assuming this is its only investment and Culver exercises significant influence over its associates policies

E. Illustrate how the statement of comprehensive income is affected in 2020.

F. Illustrate how the statement of comprehensive income is affected in 2021.

G. Prepare relevant journal entry related to Culvers investment in Martz for 2020, if you were told that Martzs 2020 statement of comprehensive income included a loss from discontinued operations of $22,000 (net of tax)?

H. Prepare the statement of comprehensive income if you were told that Martzs 2020 statement of comprehensive income included a loss from discontinued operations of $22,000 (net of tax)