Question $1(20$ marks$)$

On December $31$ of Year $1,$ Spruce Corporation purchased as an investment $$500,000$ of $10-$year, $6\%$ bonds. The bonds pay interest semi$-$annually on June $30$ and December $31.$ The bonds will yield $8\%$ on an annual basis. All amounts are rounded to the nearest dollar. Spruce Corporation intends to hold the bonds to maturity and therefore uses the cost$/$amortized cost model. Spruce Corporation follows IFRS.

Required

Complete the following with the details provided above.

Calculate the purchase price of the bond investment. $(4$ marks$)$

Prepare a bond amortization table for the bond. Use Excel, and copy the table into your Word assignment. $(8$ marks$)$

Year end is December $31.$ Prepare all of Spruce Corporation$$s journal entries related to the bonds for Year $1,$ Year $2,$ and Year $3.(8$ marks$)$

Question $2(20$ marks$)$

On March $31$ of Year $1,$ Larch Corp. acquired $10,000$ shares of Cedar Ltd$.$ for $$40$ per share. On June $30$ of Year $1,$ Larch Corp. received a dividend of $$0\mathrm{.}50$ per share. Larch Corp. accounts for receipt of dividends separately from other investment income. On December $31$ of Year $1,$ the shares were available on the stock market for $$37\mathrm{.}60.$ On April $15$ of Year $2,$ Larch Corp. sold the shares for $$38\mathrm{.}10$ per share. Larch Corp. follows IFRS and uses the FVNI model for this investment.

Required

Prepare all the journal entries related to the investment from acquisition to sale. $(20$ marks$)$

Question $3(20$ marks$)$

On June $12$ of Year $1,$ Fir Company purchased $1,000$ shares of Pine Company for a total of $$18,250$ and designated the shares as a FVOCI investment. On September $30$ of Year $1,$ Fir Company received a dividend of $40$ cents per share. On December $31$ of Year $1,$ the fair value of the shares was $$19,100.$ On February $2$ of Year $2,$ the shares were sold for $$19,800.$

Required

Provide journal entries for the above events including a journal entry to transfer any gains out of AOCI into retained earnings. $(20$ marks$)$

Question $4(20$ marks$)$

Hemlock Company has great expertise in some areas, but counting is not one of them. Since $2020$ they have been miscounting ending inventory and applying FIFO incorrectly. Their new accountant has just discovered the errors. The records and uncorrected errors since $2020,$ their first year in business, are:

Year

Net Income

Ending Inventory Error

Over$/$Understated

Amount

$2020$

$$80,000$

Overstated

$$7,000$

$2021$

$84,000$

Overstated

$9,000$

$2022$

$88,000$

Understated

$3,000$

$2023$

$90,000$

Understated

$4,000$

Required

Complete the following with the details provided above.

Prepare a worksheet that shows the correct net income for each year. Indicate each numerical change and indicate if the amount is added or deducted. Part marks are based on each correct addition or subtraction. Remember that an ending inventory error in one year represents a beginning inventory error the next year. $(10$ marks$)$

Prepare a schedule that shows the correct ending retained earnings for each year. $(10$ marks$)$

Question $5(20$ marks$)$

Juniper Inc. purchased $30,000$ of the $90,000$ outstanding shares of Yew for $$8\mathrm{.}70$ per share on January $1$ of Year $7.$ The Juniper Inc. controller believes that their company has significant interest over Yew.

During Year $7,$ Yew earned a net income of $$90,000$ and paid dividends of $$42,000.$ On December $31$ of Year $7,$ Yew shares were trading for $$9\mathrm{.}23.$

During Year $8,$ Yew earned a net income of $$111,000$ and paid dividends of $$54,000.$ On December $31$ of Year $8,$ Yew shares were trading for $$9\mathrm{.}88.$

Required

Complete the following with the details provided above.

Assuming that Juniper Inc. has significant influence over Yew, prepare all the necessary journal entries for Year $7.(10$ marks$)$

Prepare a schedule that shows all changes to the investment in the Yew account, and include the Year $8$ ending balance of the investment account. $(10$ marks$)$