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problem 1:

1920_Income statements.jpg

Insure acquired 40% of the common shares of Go-med in 20X2 for $1,072,500.

For 20X8, Insure amortized its acquisition differential as shown:

Buildings                                  $ 11,700
Long-term liabilities                 (16,250)
Goodwill impairment loss         16,900
                                               $ 12,350

Throughout 20X8, Go-med paid royalties of $162,500 to Insure that Insure comprised in its other income.

Throughout 20X8, Go-med sold land to a third party. It had acquired the land 3 years ago from Insure.  At that time, Insure had recorded a profit on the sale of $29,250.

Throughout 20X8, Go-med declared and paid dividends of $104,000.

Both Insure and Go-med pay taxes at an average rate of 40%.

Required:

Suppose that Go-med is a joint venture owned by Insure and four other ventures, that the acquisition differentials are valid, and that it has not yet adopted IFRS 11: Joint Arrangements. Make a 20X8 consolidated income statement for Insure by using proportionate consolidation.

problem 2: On April 1 of the current year, Econ Ltd. ordered maps from a foreign supplier for 500,000 units of foreign currency (FC). On April 2, Econ entered a forward contract as a cash flow hedge to get 500,000 FC on July 31 for $0.31. On July 31, the maps arrived and Econ paid the supplier in full and settled the forward contract.  Econ has an April 30 year-end.

1939_jounal entries.jpg

Required:

a) Make dated journal entries to record the transactions shown above.

b) Suppose that Econ didn’t enter into a forward contract. Make dated journal entries to record the transactions above.

c) Suppose that Econ had entered into a forward contract that was designated a fair value hedge. Make dated journal entries to record the transactions above.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93113

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