Practice Problem 1 (25 minutes) Franklin Capital purchased two properties in 2020: an office tower purchased for $1,800,000 a piece of vacant land purchased for $200,000 The office tower is 90% occupied by tenants with month-to-month leases (operating). Franklin plans to move its world headquarters into the tower and occupy the vacant penthouse. It will continue to lease the remainder of the building to tenants for rental income. Franklin incurred $50,000 in legal fees on the purchase. The land is in an area of town undergoing rapid expansion. Franklin plans to hold the property for the long term in order to capitalize on the growth in this area. There were $8,000 in transaction costs associated with the purchase and $5,000 to provide security for the first month after purchase. Franklin reports under IFRS. Required: a) Determine whether the purchases would be classified as investment properties in 2020. Use the Issue-Analysis-Recommendation (IAR) approach for your response. b) Prepare journal entries to record the purchase of each property. Practice Problem 2 (25 minutes) On January 2, 2020, Baleine Ltd. acquired 19% of the outstanding voting shares of Golf Inc. for $240,000 plus directly attributable transaction costs related to the transaction of $5,000. The fair value of Golf's identifiable net assets at acquisition date was $570,000, which equalled their carrying value. Relevant information for the year ended December 31, 2020, follows: Golf Inc. Net income (loss) $ 70,000 Dividends declared and paid 50,000 Market value of investment 260,000 Baleine negotiated for one of the five seats on Golf's board of directors as part of the transaction. The rest of Golf's shares are widely held. Baleine also committed to increase purchases of supplies from Golf by $30,000 annually. Baleine reports under IFRS. Req a) Determine whether Golf is an associate of Baleine's, using case facts to support your analysis. Use the IAR approach for your response. b) Assuming that Golf is an associate of Baleine's, prepare journal entries related to its investment in Golf for the year ended December 31, 2020, including the journal entry to record the acquisition. c) Assuming that Golf is an associate of Baleine's, determine the balance in the investment in associate (Golf) account as at December 31, 2020, to be reported on Baleine's statement of financial position (SFP). Practice Problem 3 (25 minutes) Grafton Co. purchased 2,000 of the 10,000 outstanding voting shares of Prince Ltd. on January 2, 2020, for $300,000. The rest of the shares of Prince are widely held. At the acquisition date, the summary SFP for Prince was as follows: Cash $ 100,000 Plant and equipment 1,200,000 Land 400,000 $ 1.700.000 Liabilities Common shares Retained earnings $ 400,000 800,000 500,000 $ 1.700.000 At the date of acquisition, all assets and liabilities had fair values equal to their carrying values. For the year ended June 30, 2020, Prince reported net income of $200,000. Dividends of $40,000 were declared and paid on April 30, 2020. Assume that income is earned evenly throughout the year. Prince awarded Grafton two seats on the 10-member board of directors effective January 2, 2020. Prince and Grafton report under IFRS. Required: a) Prepare all the necessary journal entries on the books of Grafton, with respect to the investment for the year ended June 30, 2020, assuming that Grafton accounts for the investment in Prince as an associate. b) Define significant influence and discuss the relevant factors in the determination of whether or not significant influence exists for Grafton. c) Now assume that Grafton purchased 1,500 shares. Discuss the relevant factors in the determination of whether or not significant influence exists for Grafton. Practice Problem 4 (25 minutes) Crown Cannabis Inc. (CCI) is a licensed grower that produces cannabis. CCI produces four varieties of cannabis, and each variety requires eight 12 weeks from seed to maturity , with an average of 10 weeks. Cannabis plants produce only one crop, after it plans to expand in the future. which they are destroyed. CCI started operations in 2020 with two growing facilities, and times, with each plant producing an average Each growing facility has 200 plants at of 1.2 pounds. When one crop has been harvested, the next crop is immediately planted. Although it is possible to save seeds from Ccl's cannabis plants to replant, it is less expensive to purchase seeds in bulk from a seed producer. Once the cannabis Columbia government . The selling prices are fixed for each variety and are not negotiable Prices for 2020 are set at an average of $625 per pound for CCI's four varieties. CCI does not regularly sell immature cannabis plants, but there is a market for these plants at an average of $200 per plant. CCI made one sale of all the 200 immature plants at both facilities in early 2020, which cost $55 per plant to ship. At the end of 2020, CCI had a total of 330 pounds of dried cannabis on hand. During the year ended December 31, 2020, CCI incurred the following costs of production: materials costs of $15 per plant labour costs of $75 per plant contracted security costs of $270,000 dried cannabis packing and shipping costs of $90 per pound CCI has a December 31 year end and reports under IFRS. CCI has not recorded any journal entries for the cannabis plants and dried cannabis at December 31, 2020. Required: a) Describe how the cannabis plants and dried cannabis should be recognized in the financial statements of CCI. Use the IAR approach for your response. b) How would the cannabis plants and dried cannabis be initially measured? c) Prepare the journal entries for the initial measurement of the cannabis plants and dried cannabis. Practice Problem 5 (10 minutes) . Recently, they began raising baby chicks and hens for sale to consumers at farmers markets. The market sells baby chicks that will turn into egg-laying hens at a price of $1 each. A one year from the time a chick hatches until it becomes an egg-laying hen. Assume costs to sell are 10% of the value of the chick/hen. Required: a) Prepare the journal entry for the initial measurement of one baby chick. b) Assuming the baby chick has matured into an egg-laying hen at the end of the next reporting period, prepare the journal entry to record the change in value. DR Biological Asset - -Baby chicks. CR Gain on intial recognition of biological Assets. To record baby chick inventory. Practice Problem 6 (10 minutes) On January 2, 2020, St. Pierre Corp. paid $250,000 for a 30% interest in Miquelon Ltd. During 2020, Miquelon declared and paid dividends of $80,000 and reported net income of $260,000. Both Miquelon and St. Pierre report under IFRS. Required: a) Assuming that St. Pierre reports its investment in Miquelon using the equity method, prepare the journal entry to record initial investment, the receipt of the dividend from Miquelon, and its share of the earnings of Miquelon for the year ended December 31, 2020. b) How would this transaction change if both Miquelon and St. Pierre reported under ASPE, assuming that St. Pierre still reports its investment in Miquelon using the equity method