1. Using IFRS 9 prepare the journal entries for DC for all of 2021. 2. Using ASPE prepare the journal entries for DC for all of 2021.
1. Using IFRS 9 prepare the journal entries for DC for all of 2021. 2. Using ASPE prepare the journal entries for DC for all of 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![On January 1, 2021 Design Corporation (DC) purchased 15% of Angel Inc. (AI) for
$ 4,000,000. It has been determined that DC does not have significant influence over
AI at this time.AI reported net income of $ 1,000,000 for the year ended December
31, 2021. They paid dividends of $ 100,000 in total for the year. The fair value of AI
was $ 30,000,000 at December 31, 2021. DC considers AI as part of their active
trading portfolio and AI is a public company.
On July 1, 2021, DC purchased 30 % of Bake Inc. (BI) for $ 10,000,000. The book
value of BI at July 1 was $ 24,000,000. BI has a patent that is not on their balance
sheet which has an estimated fair value of $ 4,000,000 on July 1, 2021. The patent
had a remaining useful life of 5 years on July 1, 2021. BI also had inventory with a
book value of $ 1,000,000 and a fair value of $ 2,000,000 on July 1, 2021. It has been
determined that DC does have significant influence over BI beginning July 1, 2021.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9bb7a4a5-2bff-4732-91c2-f9c339217e23%2F84d9fac9-5d47-42aa-a0eb-fa357cc20b7c%2Ft6s9ghs_processed.png&w=3840&q=75)
Transcribed Image Text:On January 1, 2021 Design Corporation (DC) purchased 15% of Angel Inc. (AI) for
$ 4,000,000. It has been determined that DC does not have significant influence over
AI at this time.AI reported net income of $ 1,000,000 for the year ended December
31, 2021. They paid dividends of $ 100,000 in total for the year. The fair value of AI
was $ 30,000,000 at December 31, 2021. DC considers AI as part of their active
trading portfolio and AI is a public company.
On July 1, 2021, DC purchased 30 % of Bake Inc. (BI) for $ 10,000,000. The book
value of BI at July 1 was $ 24,000,000. BI has a patent that is not on their balance
sheet which has an estimated fair value of $ 4,000,000 on July 1, 2021. The patent
had a remaining useful life of 5 years on July 1, 2021. BI also had inventory with a
book value of $ 1,000,000 and a fair value of $ 2,000,000 on July 1, 2021. It has been
determined that DC does have significant influence over BI beginning July 1, 2021.
![BI's income for the year ended December 31, 2021 was $ 4,000,000. This was earned
evenly over the year. In addition BI paid dividends of $ 300,000 each on March 31,
June 30, September 30 and December 31, 2021 to their shareholders of records on
that date. The inventory on July 1, 2021 was 75% sold as of December 31, 2021.
Required.
For the investment in AI
1. Using IFRS 9 prepare the journal entries for DC for all of 2021.
2. Using ASPE prepare the journal entries for DC for all of 2021.
For the investment in BI
3. Using IFRS prepare the journal entries for DC for 2021.
4. Using ASPE prepare the joumal entries for DC for 2021 for all options
available under ASPE.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9bb7a4a5-2bff-4732-91c2-f9c339217e23%2F84d9fac9-5d47-42aa-a0eb-fa357cc20b7c%2F5xq46c_processed.png&w=3840&q=75)
Transcribed Image Text:BI's income for the year ended December 31, 2021 was $ 4,000,000. This was earned
evenly over the year. In addition BI paid dividends of $ 300,000 each on March 31,
June 30, September 30 and December 31, 2021 to their shareholders of records on
that date. The inventory on July 1, 2021 was 75% sold as of December 31, 2021.
Required.
For the investment in AI
1. Using IFRS 9 prepare the journal entries for DC for all of 2021.
2. Using ASPE prepare the journal entries for DC for all of 2021.
For the investment in BI
3. Using IFRS prepare the journal entries for DC for 2021.
4. Using ASPE prepare the joumal entries for DC for 2021 for all options
available under ASPE.
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