Suffi Bhd is a distributor of electrical appliances and operates in central area of Selangor. The company closes its account on every 31 December. The following information is related to the equity and debt investments of Suffi Bhd:

Date

Transactions

5 January 2018

Suffi Bhd purchased RM5,000,000 of 12% bonds for RM5,250,000. The bonds provide the bondholders with a yield of 11% market rate. The interest is paid at the end of the year. The company holds the bonds to collect contractual cash flows.

30 September 2018

Suffi Bhd acquired 20,000 shares of Gemilang Bhd at RM3.50 per share and the transaction cost incurred was RM8,500. Suffi Bhd intended to sell the shares of Gemilang Bhd in the middle of 2019 to take advantage of the changes in the share prices.

7 October 2018

Suffi Bhd acquired 30,000 shares of Harmoni Bhd at RM2.00 per share. The brokerage fee incurred was RM6,000. Kukuh Bhd intended to establish these shares as a long term investment.

15 June 2019

Suffi Bhd sold 50% shares of Gemilang Bhd at the selling price of RM4.00 per share.

Additional information:

1. At the end of 2018, Suffi Bhd received a cash dividend of RM0.40 per unit of its investment in shares of Harmoni Bhd on 31 December 2018.

2. The market values of the equity investments on 31 December 2018 are as follows:

Investment

Market value per share

Gemilang Bhd

RM4.15

Harmoni Bhd

RM2.50

REQUIRED:

(a) Prepare the related journal entries of the debt investment for the year 2018.

(3 Marks)

(b) Prepare journal entries to record the purchase, the fair value adjustment and the selling of investment in Gemilang Bhd.

(5 Marks)

(c) Prepare journal entries to record the purchase, the dividend received and the fair value adjustment of investment in Harmoni Bhd.

(3 Marks)

(d) Explain FOUR (4) reasons why companies can use the financial assets to sustain the business during the COVID-19 pandemic.

(4 Marks)