Question 1
On January 3, 2015, Madagascar Holdings Inc. paid $660,000 for 30,000 common shares of Mantilla Manufacturing Ltd. This was 30% of the outstanding common shares of the latter company. Brokerage costs related to this transaction amounted to $13,000.

On January 3, 2015, the carrying value of Mantilla's net assets amounted to $1,800,000. The fair value of Mantilla's capital assets (with a remaining useful life of six years) was $150,000 higher than their book value. Any other excess of the cost of the investment over book value was attributed to unrecorded goodwill.

Mantilla declared dividends of $2.50 per share on December 1, 2015, and reported net income of $300,000 and other comprehensive income of $100,000 for 2015. Common shares of Mantilla were trading for $25 per share at the close of business on December 31, 2015.

Required:
a) Provide all 2015 journal entries for Madagascar Holdings Inc. if their 30% holding did not give them significant influence over the affairs of Mantilla Manufacturing Ltd. and they made no election at the time of acquiring the investment.

b) Provide all 2015 journal entries for Madagascar Holdings Inc. if their 30% holding did not give them significant influence over the affairs of Mantilla Manufacturing Ltd. and they elected, at the time of acquiring the investment, to account for it at fair value through other comprehensive income.

c) Provide all 2015 journal entries for Madagascar Holdings Inc. if their 30% holding did give them significant influence over the affairs of Mantilla Manufacturing Ltd. and they accounted for their investment in the same way that they reported it in their financial statements.

d) Provide all 2015 journal entries for Madagascar Holdings Inc. if that company was a Canadian private company and reported in compliance with the Canadian Accounting Standards for Private Enterprises and elected to report its investment using the cost method.

Question 2
On April 1, 2014, Pine Corporation acquired 30,000 of the 100,000 outstanding common shares of Spruce Company for a cash consideration of $240,000. For 2014, Spruce Company reported a net income of $75,000 and paid dividends of $60,000. Shares of Spruce Corporation were trading for $9 at the close of business on December 31, 2014.

On January 1, 2015, Pine Corporation acquired an additional 15,000 shares of Spruce Company at a cost of $135,000. On July 1, 2015, Pine Corporation sold 50% of their holding in Spruce Company for proceeds of $220,000. For 2015, Spruce Company reported a net income of $100,000 and paid dividends of $80,000. Shares of Spruce Corporation were trading for $11 at the close of business on December 31, 2015.

In both years, income was earned evenly over the year and dividends were declared and paid in two equal instalments on June 15 and December 15. At no time was the investment in Spruce Company considered to be one in which Pine Corporation had significant influence.

Required:
Provide journal entries to record the investment transactions (including related income) for Pine Corporation for the period from January 1, 2014, to the end of 2015, under each of the following assumptions:

a) Pine Corporation accounts for its investment in Spruce Company as an investment valued at fair value with revaluations through profit and loss;

b) Pine Corporation accounts for its investment in Spruce Company as an investment valued at fair value with revaluation through other comprehensive income; gains are transferred from accumulated other comprehensive income to retained earnings when realized;

c) Pine Corporation accounts for its investment in Spruce Company using the cost method.

Question 3

Samantha Limited has just purchased a 40% interest in Emmet Enterprises Inc. for $4,000,000. Samantha Limited has no other equity investments. You have been asked to advise Samantha Limited about the accounting choices that the company might have with respect to its investment in Emmet Enterprises Inc.

Required:

a) What options might be available if Samantha Limited was a public company and reported in compliance with IFRS?

b) What options might be available if Samantha Limited was a private company and reported under the Canadian Accounting Standards for Private Enterprises?