Hanuman Corp is a medium sized corporation that has long dominated their market with a strong cash
Question:
Hanuman Corp is a medium sized corporation that has long dominated their market with a strong cash flow position they have decided to invest excess cash stategically in particular hanuman made periodic investments with their main suppliers, shiva. Although hanuman currently owns 18% of the common shares of shiva it does not yet have significant influence over the operations of this investee company. Hanuman account for its investments in shiva using IFRS 9 and the fair value through other comprehensive income model without recycling.
The controller has gathered the following information about relevant transactions and requests your assistance in preparing required adjusting entries.
1. In 2020, Hanuman acquires shares of Ahsima corp and metta ltd, for short-term trading purposes. Hanuman purchased 100000 shares of Ahimsa for $ 1.2 million and the shares currently have a fair value of $1.4 million. Hanuman investment in metta has not been profitable the company acquires 45000 shares of Metra at $20 per share and they currently have a fair value of $634,500.
2. Before 2020, Hanuman had invested $22.4 million in shiva and, at December 31, 2019 the investment had a fair value of $21.3 million. While Hanuman did not sell or purchase any shiva shares this year, shiva declared and paid a dividend totalling $2.2 million on all its common shares, and reported 2020 net income of $13.6 million. Hanuman 18% ownership of shiva has a December 31, 2020 fair value of $21,405,000.
Instructions:
a) prepare the appropriate adjusting entries for Hanuman as at December 31, 2020.
b) prepare the dividend and adjusting entries for the shiva investment, assuming that Hanuman's 18% interest did result in significant influence over Shiva's activities.
Hint for a): Ahimsa and metta are considered Trading securities and therefore accounted for, under IFRS, as FV-NI investments. Shiva is a FV-OCI Investment. Summarize the information given and then prepare the necessary entries. In b), the investment in shiva is assumed to result in significant influence instead.
Expert Answer:
