Feherty, Inc., accounts for its investments underIFRS No. 9and purchased the following investments during December 2021:

1. One hundred and thirty of Donald Company's $1,000 bonds. The bonds pay semiannual interest, return principal in 10 years, and include no other cash flows or other features. Feherty plans to hold 20 of the bonds to collect contractual cash flows over the life of the investment and to hold 110, both to collect contractual cash flows but also to sell them if their price appreciates sufficiently. Subsequent to Feherty's purchase of the bonds, but prior to December 31, the fair value of the bonds increased to $1,040 per bond, and Feherty sold 20 of the 110 bonds. Feherty also sold 10 of the 20 bonds it had planned to hold to collect contractual cash flows over the life of the investment. The fair value of the bonds remained at $1,040 as of December 31, 2021.
2. $25,800 of Watson Company common stock. Feherty does not have the ability to significantly influence the operations of Watson. Feherty elected to account for this equity investment at fair value through OCI (FVOCI). Subsequent to Feherty's purchase of the stock, the fair value of the stock investment increased to $31,600 as of December 31, 2021.

Required:

1.Indicate how Feherty would account for its investments when it acquired the Donald bonds and Watson stock.

2.For each of the following categories of Feherty's investments, calculate the effect of realized and unrealized gains and losses on Feherty's net income, other comprehensive income, and comprehensive income for the year ended December 31, 2021:

(a) any Donald bonds accounted for at amortized cost that werepurchased and heldat year end,

(b) any Donald bonds accounted for at amortized cost that werepurchased and sold,

(c) any Donald bonds accounted for at FVOCI that werepurchased and heldat year end,

(d) any Donald bonds accounted for at FVOCI that werepurchased and sold, and

(e) the Watson stock. Ignore interest revenue and taxes.

2.Amalgamated General Corporation is a consulting firm that also offers financial services through its credit division. From time to time the company buys and sells securities. The following selected transactions relate to Amalgamated's investment activities during the last quarter of 2021 and the first month of 2022. The only securities held by Amalgamated at October 1, 2021 were $35 million of 10% bonds of Kansas Abstractors, Inc., purchased on May 1, 2021 at face value and held in Amalgamated's tradingsecurities portfolio. The company's fiscal year ends on December 31.

2021Oct.18Purchased 2 million shares of Millwork Ventures Company common stock for $55 million. Millwork has a total of 32 million shares issued.31Received semiannual interest of $2.1 million from the Kansas Abstractors bonds.Nov.1Purchased 10% bonds of Holistic Entertainment Enterprises at their $18 million face value, to be held until they mature in 2031. Semiannual interest is payable April 30 and October 31.1Sold the Kansas Abstractors bonds for $32 million because rising interest rates are expected to cause their fair value to continue to fall. No unrealized gains and losses had been recorded on these bonds previously.Dec.1Purchased 12% bonds of Household Plastics Corporation at their $60 million face value, to be held until they mature in 2031. Semiannual interest is payable May 31 and November 30.20Purchased U. S. Treasury bonds for $5.7 million as trading securities, hoping to earn profits on short-term differences in prices.21Purchased 4 million shares of NXS Corporation's 46 million shares of common stock for $46 million, planning to hold these shares untilmarket conditions encourage their sale.23Sold the Treasury bonds for $5.8 million.29Received cash dividends of $5 million from the Millwork Ventures Company sharesof common stock.31Recorded any necessary adjusting entries relating to the investments. The market price of the Millwork Ventures Company commonstock was $25.00 per share and $12.50 per share for the NXS Corporation common stock. The fair values of the bond investments were $59.1 million for Household Plastics Corporation and $16.8 million for Holistic Entertainment Enterprises.

2022Jan.7Sold the NXS Corporation common stock shares for $45 million.

Required:

Prepare the appropriate journal entry for each transaction or event.Use one summary entry on December 31 to adjust the portfolio of equity investments to fair value.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place, (i.e., 5,500,000 should be entered as 5.5).)

3.On January 4, 2021, Runyan Bakery paid $328 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery's operations. Runyan chose the fair value option to account for this investment. Runyan received dividends of $2.50 per share on December 15, 2021, and Lavery reported net income of $170 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $31 per share. On the purchase date, the book value of Lavery's identifiable net assets was $820 million and:

1. The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $60 million.
2. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.

Required:

Assuming Runyan accounts for this investment under the fair value option, prepare all appropriate journal entries in a manner similar to accounting for securities for which there is not significant influence.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions. (i.e., 10,000,000 should be entered as 10).)

4.On January 2, 2021, Miller Properties paid $15 million for 1 million shares of Marlon Company's 6 million outstanding common shares. Miller's CEO became a member of Marlon's board of directors during the first quarter of 2021.

The carrying amount of Marlon's net assets was $52 million. Miller estimated the fair value of those net assets to be the same except for a patent valued at $30 million above cost. The remaining amortization period for the patent is 10 years.

Marlon reported earnings of $15 million and paid dividends of $3 million during 2021. On December 31, 2021, Marlon's common stock was trading on the NYSE at $14.50 per share.

Required:

2.Assume Miller accounts for its investment in Marlon using the equity method. Ignoring income taxes, determine the amounts related to the investment to be reported in its 2021.(Do not round intermediate calculations. Enter all amounts as positive values. Enter your answers in millions rounded to 1 decimal places, (i.e., 5,500,000 should be entered as 5.5).):

5.On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $340,000. The Cortland bonds have a stated interest rate of 5%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1,PV of $1,FVA of $1,PVA of $1,FVAD of $1andPVAD of $1)(Use appropriatefactor(s) from the tables provided.):

January 1, 20216.0%June 30, 20217.0%December 31, 20218.0%

Required:

1.Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.

2.Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.

3.Prepare all appropriate journal entries related to the bond investment during 2021, assuming that Ithaca chose the fair value option when the bonds were purchased, and that Ithaca determines fair value of the bonds semiannually. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.