PART A $(10$ marks$)$

Jingle Bells Co$.($JBC$)$ is a public company with a December $31$ year end. Financial statements are

prepared using IFRS $9.$ Interest income and dividends are reported separately from unrealized gains

and losses. On March $31,2016,$ JBC acquired $6,000$ shares $(30\%$ of the outstanding shares$)$ of

Mistletoe Inc. $($MI$)$ at a price of $$14$ per share in cash. On December $31,2016,$ MI paid a dividend of

$$1\mathrm{.}50$ per share and MI reported net income of $$36,000$ for the $12$ months ended December $31,2016,$

which was earned evenly over the year. On December $31,2016$ the MI shares had a fair value of $$16$

per share.

Required:

Briefly explain in one or two sentences each, under what circumstances JBC would account for the

MI shares using each of the following scenarios:

i$)$ The equity method

ii$)$ Fair value through net income $($FV$-$NI$)$

iii$)$ Fair value through other comprehensive income $($FV$-$OCI$)$

Assuming the investment in MI is accounted for by JBC using the equity method, provide all journal

entries to be made by JBC on March $31$ and December $31,2016.$

Assuming the investment in MI is accounted for by JBC using FV$-$NI$,$ provide all journal entries to

be made by JBC on December $31,2016.$

PART B $(14$ marks$)$

The management of JBC has decided to sell the shares of MI on September $1,2017$ at a price of $$13$

per share and purchase a $$100,000,6\%,8$ year government bond plus accrued interest. The bond pays

interest annually on July $1.$ The market rate of interest on the date of purchase was $4\%.$ JBC$\text{'}$s

business model requires that the bond will be held until maturity to collect the contractual principle and

interest payments. On December $31,2017,$ the government bonds had a fair value of $$105,000.$

Required:

Provide all journal entries required to record the sale of the MI shares on September $1,2017$

assuming the investment in MI was classified as FV$-$NI$.$

Provide all journal entries required to record the sale of the MI shares on September $1,2017$

assuming the investment in MI was classified as FV$-$OCI.

Provide all journal entries related to the government bond on September $1,2017$ and December $31,$

Show all calculations and round all numbers to the nearest cent.