Tamarisk Ltd. is a Canadian publicly-traded business with a December 31 fiscal y

Question

Tamarisk 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, Tamarisk purchased 240 common shares of AFS Corporation on July 1, 2017 at a price of $4.76 per share. On the day of acquisition, Tamarisk 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 $0.90/share, and paid those dividends on August 20, 2017. On December 31, 2017, shares in AFS were trading at $6.40 per share. On September 15, 2018, Tamarisk sold the shares in AFS for $7.40 per share. Prepare the journal entries required to record the above transactions on the books of Tamarisk Ltd.

Explanation / Answer

Date Accounts Debit Credit 2017 1-Jul FV-OCI Investment $ 1,142.40 Cash $ 1,142.40 (Recording purchase of 240 common shares of AFS @$4.76) 1-Aug No Entry 20-Aug Cash $     216.00 Investment income $     216.00 (Recording dividend income received for 240 shares@$0.90) 31-Dec FV-OCI Investment $     393.60 Unrealised gain or loss -OCI $     393.60 (Recording unrealised gain on increase in share price 240*($6.40-$4.76) 2018 15-Sep FV-OCI Investment $     240.00 Unrealised gain or loss -OCI $     240.00 (Recording unrealised gain on increase in share price 240*($7.40-$6.40) 15-Sep Cash (240*$7.40) $ 1,776.00 FV-OCI Investment $ 1,776.00 (Recording sale proceeds of 240 common stock @$7.4) 15-Sep Unrealised gain or loss -OCI $     393.60 Unrealised gain or loss -OCI $     240.00 Retained Earnings $     633.60 (Transferring unrealized gain to retained earnings)

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