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Octavio Corp. prepares financial statements annually on December 3 1 , its fiscal year end. The company follows IFRS. At December 3 1 , 2
Octavio Corp. prepares financial statements annually on December its fiscal year end. The company follows IFRS. At December the company has the account Investments in its general ledger, containing the following debits for investment purchases, and no credits:
Feb.
Chiang Corp. common shares, no par value, shares
$
Apr.
Government of Canada bonds, due April interest payable April and October bonds of $ par value each
July
Monet Corp. bonds, par $ dated March purchased at plus accrued interest to yield interest payable annually on March due on March
Nov.
$ sixmonth noninterestbearing note that matures on May bought to yield
The fair values of the individual securities on December were:
Chiang Corp. common shares active stock market price
$
Government of Canada bonds
Monet Corp. bonds
Note receivable
The Government of Canada bonds were being managed for their yield to maturity and are being held to maturity, and the Monet bonds were acquired with the hope of gaining from falling interest rates. The Chiang shares were acquired with the hope of ensuring the supply of raw materials from this company in the future when more shares will be purchased.
Instructions
Round amounts to the nearest dollar.
Which measurement model should Octavio use for each investment? Hint: Use the decision tree in Illustration to help analyze this situation. At each decision point in the decision tree, analyze the next step.
Prepare the entries necessary to correct any errors in the Investments account.
Prepare the entries required to record any accrued interest, amortization of any premium or discount, and recognition of fair values on December
During the following transactions took place:
The note was sold on February for $
The Government of Canada bonds were sold on July for $ plus accrued interest. Prepare entries to record these transactions.
Assume that the note was not sold on February but instead was held until it matured. Provide the proper entry to record the disposal of the note at maturity.
Assume that Octavio Corp. is a private entity and applies ASPE. Identify which, if any, of your answers to parts a to e would change under this assumption. Explain briefly.
Step by Step Solution
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Step: 1
The question is complete Lets break it down into parts and address each one systematically Step 1 Determine the Measurement Model for Each Investment 1 Chiang Corp Common Shares Purpose Held with the ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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