Novak Corporation made the following purchases of investment

Novak Corporation made the following purchases of investments during 2017, the first year in which Novak invested in equity securities:

On May 20, 2017, Novak sold 2,490 of the Nirmala common shares at a market price of $29 per share less brokerage commissions of $2,366. The year-end fair values per share were as follows: Nirmala $25; Oxana $46; and WTA $23. The chief accountant of Novak tells you that Novak Corporation holds these investments with the intention of selling them in order to earn short-term profits from appreciation in their prices and accounts for them using the FV-NI model, with no separate reporting of dividends and other types of FV-NI investment income and losses.

Assume that Novak Corporation follows IFRS 9.

1. Prepare the journal entries to record the three investments. (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. Round answers to 0 decimal places, e.g. 5,275.)

2. Prepare the journal entry for the sale of the 2,490 Nirmala shares on May 20. (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. Round answers to 0 decimal places, e.g. 5,275.)

3. Prepare the adjusting entry needed on December 31, 2017. (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. Round answers to 0 decimal places, e.g. 5,275.)

4. Repeat the parts above, assuming the investments are accounted for using FV-OCI with no recycling. Novak’s policy is to capitalize transaction costs on the acquisition of FV-OCI investments and reduce the proceeds on disposal. (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. Round answers to 0 decimal places, e.g. 5,275.)

1.		On January 15, purchased 7,470 shares of Nirmala Corp.’s common shares at $27.81 per share plus commission of $1,643.
2.		On April 1, purchased 4,150 shares of Oxana Corp.’s common shares at $43 per share plus commission of $2,797.
3.		On September 10, purchased 5,810 shares of WTA Corp.’s preferred shares at $22.00 per share plus commission of $2,415.

Solution

Date/S.N. Account title & Explanation Debit Credit Amount in $ Amount in $ Cost per share Requirement 1 Jan-15 FV-NI Investment in Nirmala Corp\'s Common shares 209383.7 28.02995 Cash 209383.7 To record the FV-NI Investment Apr-01 FV-NI Investment in Oxana Corp\'s Common shares 181247 43.67398 Cash 181247 To record the FV-NI Investment Sep-10 FV-NI Investment in WTA corp\'s prefered shares 130235 22.41566 Cash 130235 To record the FV-NI Investment Requirment 2 May-20 Cash 69844 FV-NI Investment in Nirmala Corp\'s Common shares 69794.57 Profit on sale of FV-NI Investment 49.43 To record the profit on sale of FV-NI Investment Requirement 3 Dec-31 Unrealized Holding loss on FV-NI Investments (Net Income) 2041.13 FV-NI Investment in Oxana Corp\'s Common shares 9653 FV-NI Investment in WTA corp\'s prefered shares 3395 FV-NI Investment in Nirmala Corp\'s Common shares 15089.13 Requirement 4 On the basis of assumption that the investment are accounted for using FV-OCI with no recycling. Jan-15 FV-OCI Investment in Nirmala Corp\'s Common shares 209383.7 Cash 209383.7 To record the FV-OCI Investment Apr-01 FV-OCI Investment in Oxana Corp\'s Common shares 181247 Cash 181247 To record the FV-OCI Investment Sep-10 FV-OCI Investment in WTA corp\'s prefered shares 130235 Cash 130235 To record the FV-OCI Investment May-20 Cash 69844 FV-OCI Investment in Nirmala Corp\'s Common shares 69794.57 Profit on sale of FV-OCI Investment 49.43 To record the profit on sale of FV-OCI Investment Dec-31 Unrealized Holding loss on FV-OCI Investments (Other Comprehensive Income) 2041.13 FV-OCI Investment in Oxana Corp\'s Common shares 9653 FV-OCI Investment in WTA corp\'s prefered shares 3395 FV-OCI Investment in Nirmala Corp\'s Common shares 15089.13