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- 1. Chapter 2 – Intercorporate Equity Investments: An Introduction SSP 2A-1 Situation 1 January 1, 20X3 Investment in Investee (FVTOCI Investment) 100,000 Cash 100,000 (to record the initial investment) During 20X3 Cas h 10,000 Dividend Revenue 10,000 (to record receipt of dividend income) December 31, 20X3 Investment in Investee (FVTOCI Investment) 20,000 OCI 20,000 (to report the investment at its fair value) January 3, 20X4 Investment in Investee (FVTOCI Investment) 50,000 Cash 50,000 (to record the additional purchase of shares) Situation 2 All entries prior to January 3, 20X4, are identical to those in Situation 1, above January 3, 20X4 Investment in Investee (Investment in Associate) 50,000 Cash 50,000 (to record the additional purchase as an investment in an associate) Investment in Investee (Investment in Associate) 120,000 Investment in Investee (FVTOCI Investment) 120,000 (to reclassify the FVTOCI investment as an investment in an associate) Copyright © 2014 Pearson Canada Inc. 80
- 2. Chapter 2 – Intercorporate Equity Investments: An Introduction Situation 3 All entries prior to January 3, 20X4, are identical to those in Situation 1, above January 3, 20X4 Investment in Investee (Investment in Subsidiary) 50,000 Cash 50,000 (to record the additional purchase as an investment in a subsidiary) Investment in Investee (Investment in Subsidiary) 125,000 Investment in Investee (FVTOCI Investment) 120,000 OCI 5,000 (to record deemed sale of the FVTOCI invesment and deemed purchase of shares in subsidiary at fair value) Copyright © 2014 Pearson Canada Inc. 81
- 3. Chapter 2 – Intercorporate Equity Investments: An Introduction SSP 2A-2 Situation 1 January 1, 20X3 Investment in Investee (Investment in Associate) 100,000 Cash 100,000 (to record the initial investment) During 20X3 Investment in Investee (Investment in Associate) 15,000 Equity in the Earnings of Investee 15,000 (to record Investor's share of Investee's earnings) Cas h 10,000 Investment in Investee (Investment in Associate) 10,000 (to record receipt of dividends as return of capital) January 3, 20X4 Investment in Investee (Investment in Associate) 50,000 Cash 50,000 (to record the additional purchase of shares) Situation 2 All entries prior to January 3, 20X4, are identical to those in Situation 1, above Investment in Investee (Investment in Subsidiary) 50,000 Cash 50,000 (to record the additional purchase of shares) Investment in Investee (Investment in Subsidiary) 125,000 Investment in Investee (Investment in Associate) 105,000 Gain on deemed sale and purchase 20,000 (to record deemed sale of investment in associate and deemed purchase of shares in subsidiary at fair value) Copyright © 2014 Pearson Canada Inc. 82
- 4. Chapter 2 – Intercorporate Equity Investments: An Introduction SSP 2A-3 January 1, 20X3 Investment in Investee (FVTOCI Investment) 150,000 Cash 150,000 (to record the initial investment) During 20X3 Cas h 15,000 Dividend Revenue 15,000 (to record receipt of dividend income) December 31, 20X3 OCI 6,000 Investment in Investee (FVTOCI Investment) 6,000 (to report the investment at its fair value) January 3, 20X4 Cas h 50,000 Investment in Investee (FVTOCI Investment) 48,000 OCI (gain on partial sale of FVTOCI Investment) 2,000 (to record partial sale of FVTOCI Investment) Copyright © 2014 Pearson Canada Inc. 83
- 5. Chapter 2 – Intercorporate Equity Investments: An Introduction SSP 2A-4 January 1, 20X3 Investment in Investee (Investment in Associate) 150,000 Cash 150,000 (to record the initial investment) During 20X3 Investment in Investee (Investment in Associate) 12,000 Equity in the Earnings of Investee 12,000 (to record Investor's share of Investee's earnings) Cas h 15,000 Investment in Investee (Investment in Associate) 15,000 (to record receipt of dividends as return of capital) January 3, 20X4 Cas h 50,000 Investment in Investee (Investment in Associate) 49,000 Gain on Partial Sale of Investment in Investee 1,000 (to record partial sale of investment in Investee) Copyright © 2014 Pearson Canada Inc. 84
- 6. Chapter 2 – Intercorporate Equity Investments: An Introduction SSP 2A-5 All entries prior to January 3, 20X4, are identical to those in 2A-4, above January 3, 20X4 Investment in Investee (FVTPL Investment) 100,00 0 Cas h 50,000 Investment in Investee (Investment in Associate) 147,00 0 Gain on Deemed Sale of Investment in Investee 3,000 (to record deemed sale of investment in associate and deemed purchase of FVTPL investment at fair value) Copyright © 2014 Pearson Canada Inc. 85
- 7. Chapter 2 – Intercorporate Equity Investments: An Introduction SSP 2A-5 All entries prior to January 3, 20X4, are identical to those in 2A-4, above January 3, 20X4 Investment in Investee (FVTPL Investment) 100,00 0 Cas h 50,000 Investment in Investee (Investment in Associate) 147,00 0 Gain on Deemed Sale of Investment in Investee 3,000 (to record deemed sale of investment in associate and deemed purchase of FVTPL investment at fair value) Copyright © 2014 Pearson Canada Inc. 85