a) Prepare all journal entries necessary for the investment-related transactions in 2021. 1. b) Prepare all journal entries necessary for the sale of the shares on February 15, 2022.

Individual Income Taxes
43rd Edition
ISBN:9780357109731
Author:Hoffman
Publisher:Hoffman
Chapter19: Deferred Compensation
Section: Chapter Questions
Problem 52P
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On March 15, 2021, Smith Corp. (Smith) purchased 18,000 common shares of
Costa Inc. (CI) for $72,000, plus transaction costs of $6,000. Smith elected to record the
shares of Cl at fair value through other comprehensive income. On July 15, 2021, Smith
received a $1.50 per share dividend. At December 31, 2021, the fair value of Cl's
shares was $7.00 per share.
On February 15, 2022, all the shares of CI were sold for $12.00 per share due to the
favourable market rate of the shares. Smith's policy is to transfer the net balance of
accumulated other comprehensive income to retained earnings upon derecognition of
the investment in Cl's shares.
Smith reports under IFRS.
Required:
a) Prepare all journal entries necessary for the investment-related transactions in 2021.
b) Prepare all journal entries necessary for the sale of the shares on
February 15, 2022.
Transcribed Image Text:On March 15, 2021, Smith Corp. (Smith) purchased 18,000 common shares of Costa Inc. (CI) for $72,000, plus transaction costs of $6,000. Smith elected to record the shares of Cl at fair value through other comprehensive income. On July 15, 2021, Smith received a $1.50 per share dividend. At December 31, 2021, the fair value of Cl's shares was $7.00 per share. On February 15, 2022, all the shares of CI were sold for $12.00 per share due to the favourable market rate of the shares. Smith's policy is to transfer the net balance of accumulated other comprehensive income to retained earnings upon derecognition of the investment in Cl's shares. Smith reports under IFRS. Required: a) Prepare all journal entries necessary for the investment-related transactions in 2021. b) Prepare all journal entries necessary for the sale of the shares on February 15, 2022.
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