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Homework answers / question archive / Pronghorn Corporation a Canadian-based international company that follows IFRS, has the following securities in its portfolio of investments acquired for trading purposes and accounted for using the FV-NI method on December 31, 2019: Investments   Carrying Amount (before adjustment)   Fair Value 1,300 shares of David Jones Inc

Pronghorn Corporation a Canadian-based international company that follows IFRS, has the following securities in its portfolio of investments acquired for trading purposes and accounted for using the FV-NI method on December 31, 2019: Investments   Carrying Amount (before adjustment)   Fair Value 1,300 shares of David Jones Inc

Accounting

Pronghorn Corporation a Canadian-based international company that follows IFRS, has the following securities in its portfolio of investments acquired for trading purposes and accounted for using the FV-NI method on December 31, 2019:
Investments   Carrying Amount
(before adjustment)		   Fair Value
1,300 shares of David Jones Inc., common     $72,500     $67,900  
4,900 shares of Hearn Corp., common     166,600     161,800  
450 shares of Alessandro Inc., preferred     76,500     79,000  
      $315,600     $308,700  

In 2020, Pronghorn completed the following securities transactions:
Mar. 1   Sold the 1,300 shares of David Jones Inc. common at $48 per share, less fees of $600.
Apr. 1   Bought 900 shares of Oberto Ltd. common at $71 per share, plus fees of $1,100.

Pronghorn Corporation’s portfolio of trading securities appeared as follows on December 31, 2020:
Investments   Original Cost   Fair Value  
4,900 shares of Hearn Corp., common   $166,600     $161,800  
900 shares of Oberto Ltd., common   63,900     61,600  
450 shares of Alessandro Inc., preferred   76,500     74,600  
    $307,000     $298,000  

Assume that the company does not recognize and report dividends and other components of investment gains and losses separately.
 
 
 
 
 
  Your answer is partially correct. Try again.
   
Prepare the Pronghorn Corporation general journal entry to record the adjusting entry for December 31, 2019. (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.)

Account Titles and Explanation

Debit

Credit
     
     
 

SHOW LIST OF ACCOUNTS

LINK TO TEXT
 
 
 
 
  Your answer is partially correct. Try again.
   
Prepare the Pronghorn Corporation general journal entry to record the sale of the David Jones Inc. shares. (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.)

Account Titles and Explanation

Debit

Credit
     
     
     
 
 
 
 
 
Prepare the Pronghorn Corporation general journal entry to record the purchase of the Oberto Ltd. shares. (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.)
 
 
 
 
Prepare the Pronghorn Corporation general journal entry to record the adjusting entry for December 31, 2020. (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.)

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a.

Account Titles and Explanation Debit Credit
Investment Income or Loss          6,900  
FV-NI Investments            6,900
To record the adjusting entry    

b.

Account Titles and Explanation Debit Credit
Cash        61,800  
Investment Income or Loss          6,100  
FV-NI Investments          67,900
To record the sale of the David Jones Inc. shares    

c.

Account Titles and Explanation Debit Credit
FV-NI Investments        63,900  
Investment Income or Loss          1,100  
Cash          65,000
To record the purchase of the Oberto Ltd. shares    

d.

Account Titles and Explanation Debit Credit
Investment Income or Loss          6,700  
FV-NI Investments            6,700
To record the adjusting entry    

Calculation

a.

To record the adjusting entry for December 31, 2019, we need to debit the Investment Income or Loss account as it the loss and credit the FV-NI Investments. For that we need to find the variance of the total Carrying Amount before adjustment and the total fair value.

So, FV-NI Investments loss = 315,600 - 308,700 = 6,900

b.

To record the sale of the David Jones Inc. shares, we need to debit the cash received and also the Investment Income or Loss. And credit the FV-NI Investments account.

Cash received = 1300 x 48 - 600 = 61,800

FV-NI Investments = Fair value of the invesment which is 67,900

So the loss = 67,900 - 61,800 = 6,100

c.

To record the purchase of the Oberto Ltd. shares, we need to credit the cash paid and then debit the loss and the FV-NI Investments account.

FV-NI Investments = 900 x 71 = 63900

loss = 1,100

Cash paid = 63900 + 1,100 = 65,000

d.

To record the adjusting entry for December 31, 2020, we need to debit the Investment Income or Loss account as there is the loss and credit the FV-NI Investments. For that we need to find the variance of the total Carrying Amount before adjustment and the total fair value.

  Carrying Amount Fair
Value
Hearn Corp 161,800 161,800
Oberto Ltd             63,900 61,600
Alessandro Inc 79,000 74,600
Total portfolio 304,700 298,000

So, FV-NI Investments loss = 304,700 - 298,000 = 6,700

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