70.2K

Verified Solution

Link Copied!

1. In 2019, its first year of operations, Brighton Finance Corporation, based in London, UK, had the following transactions regarding its investments (currency in British pound, ):

May 1 Purchased 600 Clifford Ltd. common shares for 60 per share. This investment is held for trading purposes.

June 1 Purchased 1,000 bonds of Gladstone Inc. at face-value price of 100 each. These bonds bear interest at 6%, which is paid semi-annually on November 30 and May 31 each year. They were also purchased for trading purposes.

July 1 Purchased 4,000 Waterloo Corporation common shares for 70 per share. This represents 25% of the issued common shares. Because of this investment, the directors of Waterloo have invited a Brightons executive to sit on their board.

Sep. 1 Received a 1-per-share cash dividend from Waterloo Corporation.

Nov. 1 Sold 200 Clifford Ltd. common shares for 63 per share.

Nov. 30 Interest on the Gladstone Inc. bonds was received.

Dec. 15 Received a 0.50-per-share cash dividend on Clifford Ltd. common shares.

Dec. 31 On this date, the fair values per share were 55 for Clifford Ltd. and 73 for Waterloo Corporation. The fair value of the Gladstone bonds was 101 each. Waterloo reported a profit for the year ended December 31, 2019, of 100,000.

Instructions:

A. Make journal entries on the above transactions up to Dec. 15. (30%) B. Prepare the adjusting journal entries required to report the investments at their fair value and accrue any investment revenue at the end of 2019. (30%) C. Show the partial presentation of each investment and the related investment income reflected in Brightons 2019 statement of financial position and income statement. (30%)

Answer & Explanation Solved by verified expert

See Answer