Additional Problem 2 Indigo Ltd. is a Canadian publicly-traded business with a D
ID: 2512781 • Letter: A
Question
Additional Problem 2
Indigo Ltd. is a Canadian publicly-traded business with a December 31 fiscal year end. In order to get a better return on some of its excess cash, Indigo purchased 240 common shares of AFS Corporation on July 1, 2017 at a price of $5.83 per share. On the day of acquisition, Indigo elected to account for the investment using the fair-value through other comprehensive income (FV-OCI) without recycling model. On August 1, 2017, AFS declared dividends of $1.90/share, and paid those dividends on August 20, 2017. On December 31, 2017, shares in AFS were trading at $6.30 per share. On September 15, 2018, Indigo sold the shares in AFS for $7.30 per share.
Prepare the journal entries required to record the above transactions on the books of Indigo Ltd. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. Round answers to 0 decimal places, e.g. 5,275.)
Date
Account Titles and Explanation
Debit
Credit
(To adjust to current fair value.)
(To record the sale of shares.)
Date
Account Titles and Explanation
Debit
Credit
July 1, 2017Aug. 1, 2017Aug. 20, 2017Dec. 31, 2017Sept. 15, 2018
July 1, 2017Aug. 1, 2017Aug. 20, 2017Dec. 31, 2017Sept. 15, 2018
July 1, 2017Aug. 1, 2017Aug. 20, 2017Dec. 31, 2017Sept. 15, 2018
July 1, 2017Aug. 1, 2017Aug. 20, 2017Dec. 31, 2017Sept. 15, 2018
July 1, 2017Aug. 1, 2017Aug. 20, 2017Dec. 31, 2017Sept. 15, 2018
(To adjust to current fair value.)
(To record the sale of shares.)
Fair Value-Other ComprehensiveIncome (OCI) without recycling:
Explanation / Answer
Date Accounts Title Dr cr July 1 2017 Investment in securities $1,399 Cash (240*5.83) $1,399 (being AFS securities purchases) Aug 1 2017 No entry required Aug 20 2107 Cash $456 Dividend Income $456 (240*1.9) (being dividend income received) 31-Dec FV-OCI 113 Unrealized gain on securities $113 (6.3-5.83)*240 (being securities adjsuted to fair value) Sep 15 2018 Cash (240*7.3) $1,752 Unrealized gain on securities $113 Gain on securities $466 Investment in securities $1,399 (being sale of investment)
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