Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hello, I was able to fill in the accounts but need help with the calculations. If you can write your process out that would help

Hello, I was able to fill in the accounts but need help with the calculations. If you can write your process out that would help me learn the concept.

Feherty, Inc., accounts for its investments under IFRS No. 9 and purchased the following investments during December 2018: One hundred and thirty of Donald Companys $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 Fehertys 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, 2018. $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 Fehertys purchase of the stock, the fair value of the stock investment increased to $31,600 as of December 31, 2018.

Required: Calculate the effect of realized and unrealized gains and losses associated with the Donald bonds and the Watson stock on Fehertys net income, other comprehensive income, and comprehensive income for the year ended December 31, 2018. Ignore interest revenue and taxes.

Calculate the effect of realized and unrealized gains and losses associated with the Donald bonds and the Watson stock on Fehertys net income, other comprehensive income, and comprehensive income for the year ended December 31, 2018. Ignore interest revenue and taxes. (Loss amounts should be indicated by minus sign.)

Net income
Realized gain on 10 bonds
Realized gain on 20 bonds
Total effect on net income $0
Other comprehensive income (OCI)
Unrealized gain on 90 bonds
Unrealized gain on Watson equity
Total effect on other comprehensive income 0
Comprehensive income
  • Required 1

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started