Question 5 (12 marks)

Dulin Corp. (Dulin), a public company, had the following investments in financial assets at December 31, 2018:

Company

Classification

Original cost

Carrying value

Fair value

ABC Corp. shares

FVOCI*

$340,000

$420,000

$380,000

DEF Inc. shares

FVOCI*

140,000

120,000

135,000

GHI Inc. shares

FVPL**

220,000

260,000

290,000

$700,000

$800,000

$805,000

*FVOCI = Fair value through other comprehensive income

**FVPL = Fair value through profit or loss

The carrying values at December 31, 2018, are before the year-end fair value adjustments.

During its fiscal year ended December 31, 2019, Dulin had the following transactions:

On January 1, 2019, Dulin purchased bonds of Kelly Ltd. with a face value of$100,000. The bonds mature on December 31, 2025, and pay interest semi-annuallyon June 30 and December 31 at 5% per annum. The bonds were purchased to yield4.6%. Dulin classifies these bonds as FVOCI.

On March 31, 2019, Dulin sold the shares of ABC Corp. for proceeds of $367,000,and its policy for this investment is to transfer the net balance of accumulated othercomprehensive income (AOCI) to retained earnings upon derecognition.

On June 20, 2019, Dulin purchased the shares of KLH Corp. at a cost of $250,000.Dulin classifies these shares as FVOCI.

On October 31, 2019, Dulin sold the shares of GHI Inc. for proceeds of $325,000.

At December 31, 2019, the fair values of the DEF Inc. shares and the KLH Corp. shares were $144,000 and $243,000, respectively, and the Kelly Ltd. bonds were trading at 103% of the face value. Required:

a)Prepare the journal entries for the year ended December 31, 2018. (3 marks)

b)Prepare the journal entries for Dulin's transactions during 2019. (5.5 marks)

c)Prepare the journal entries for the year ended December 31, 2019. (3.5 marks)