Sweet Dream Ice Cream $($SDIC$)$ was established in $1995$ in Selwyn, ON$,$ by Kristen Smith to

produce natural ice creams using only milk, sugar, chocolate, and fruits. The company prides

itself on its wide selection of varieties and the fact that it uses no preservatives or stabilizers.

Kristen is planning to take the company public within the next few years; however, she is having

doubts given the recent turbulence in the equity markets as a result of the global economic

slowdown. The IPO market has become much more competitive as investors are hesitant to take

on the risks associated with small cap companies. Only companies with a strong financial

position and earnings growth have been greeted positively by the equity markets.

The controller of SDIC is preparing the year$-$end financial statements and external audit working

paper file. The controller is reviewing the following transactions that took place during the year

$($all figures are in $\text{'}000$s$)$:

Large Order Sale and Note Receivable: The company agreed to sell a large order of ice

cream to a retailer in exchange for $$10,000$ cash and a note receivable for $$50,000$ at $3\%.$ The

note is repayable at the end of a two$-$year period. Interest must be paid at the end of each year.

The retailer's normal borrowing rate is prime plus $3\%.$ At the time of the sale, prime was $3\%.$

SDIC recorded revenues of $$60,000.$

Futures Contract for Milk: Given the recent volatility in the market, SDIC decided to enter

into a futures contract to lock in the price of milk on April $1.$ The contract is traded on the

Chicago Mercantile Exchange, under the symbol DC$,$ and is for the standard contract size of

$200,000lbs.$ The contract was entered into at a price of $$21\mathrm{.}22$ per hundredweight. As at

year$-$end, milk was trading at $$19\mathrm{.}54$ per hundredweight. SDIC has not recognized this futures

contract in the accounts. Patent Infringement Settlement and Bond Fund Investment: On July $1,$ the company

received a $$150,000$ patent infringement settlement regarding a competitor's use of SDIC's

special recipe. The funds are going to be used to reinvest in the business's capital assets and

expand operations within the next two years. Because the expansion is not taking place until next

year, management decided to invest funds into an exchange traded fund that invests in a mixture

of short and long$-$term bonds. The bond fund was trading at $$12\mathrm{.}50$ per share on July $1,$ and at

$$13\mathrm{.}38$ on December $31.$ This bond fund is being carried at its historical cost.

Purchase of Five$-$Year Bond: On January $1,$ the company purchased for $$150,000$ a newly

issued, five$-$year bond that was yielding $6\%,$ when the market rate was $6\%.$ Interest is paid

annually. As of year$-$end, global economic turmoil resulted in a flight to safety, pushing market

yields down. The market rate for this bond is now $5\%.$ Management plans to use the funds from

the bonds to help finance the future expansion plans. The bond is currently being measured at

amortized cost. Investment in Twin Cones $($TC$)$: During the prior year, SDIC purchased $10\%$ of the common

shares of Twin Cones $($TC$),$ a producer of dipped ice cream cones, for $$200,000.$ The shares of

TC are not publicly traded, and the purchase price was established as five times net income of

$$40,000.$ The past fiscal year has proved to be a challenge for TC due to increased competition,

commodity price inflation, and an inability to raise prices due to limits on consumer

discretionary spending. TC$\text{'}$s most recent financial statements report reveals net income of

$$27,500.$

Prior to the above$-$noted transactions, pretax net income was $$225,000.$ The management team is

happy about the current year results as they will obtain a bonus of $$11,250,$ or $5\%$ of net income.

The company has a December $31$ year end.

Required: Assume the role of the controller and prepare a report that discusses the recognition

and measurement of the financial instruments noted above. The company uses IFRS.