Question

I answered everything correctly except the values for the last journal entry. Thank you so much in advance.

Blue Spruce Corporation made the following purchases of investments during 2020, the first year in which Blue Spruce invested in equity securities:

1.		On January 15, purchased 10,350 shares of Nirmala Corp.’s common shares at $38.50 per share plus commission of $2,277.
2.		On April 1, purchased 5,750 shares of Oxana Corp.’s common shares at $60 per share plus commission of $3,876.
3.		On September 10, purchased 8,050 shares of WTA Corp.’s preferred shares at $30.50 per share plus commission of $3,347.

On May 20, 2020, Blue Spruce sold 3,450 of the Nirmala common shares at a market price of $40 per share less brokerage commissions of $3,278. The year-end fair values per share were as follows: Nirmala $35, Oxana $63, and WTA $32. The chief accountant of Blue Spruce tells you that Blue Spruce 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.

Assume that Blue Spruce Corporation follows IFRS 9.

Blue Spruce Corporation made the following purchases of investments during 2020, the first year in which Blue Spruce invested in equity securities:

1.		On January 15, purchased 10,350 shares of Nirmala Corp.’s common shares at $38.50 per share plus commission of $2,277.
2.		On April 1, purchased 5,750 shares of Oxana Corp.’s common shares at $60 per share plus commission of $3,876.
3.		On September 10, purchased 8,050 shares of WTA Corp.’s preferred shares at $30.50 per share plus commission of $3,347.

On May 20, 2020, Blue Spruce sold 3,450 of the Nirmala common shares at a market price of $40 per share less brokerage commissions of $3,278. The year-end fair values per share were as follows: Nirmala $35, Oxana $63, and WTA $32. The chief accountant of Blue Spruce tells you that Blue Spruce 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.

Assume that Blue Spruce Corporation follows IFRS 9.

Account Titles	Debit	Credit
Jan. 15 FV-NI Investments	398786
Investment Income or Loss	2277
Cash		401063
April 1. FV-NI Investments	345000
Investment Income or Loss	3876
Cash		348876
Sep. 10 FV-NI Investments	245364
Investment Income or Loss	3347
Cash		248711

Prepare the journal entry for the sale of the 3,450 Nirmala shares on May 20.

Account Titles	Debit	Credit
May 20. Cash	134722
FV-NI Investments		132825
Gain on Disposal of Investments - FV-NI		1897

Prepare the adjusting entry needed on December 31, 2020.

Account Titles	Debit	Credit
FV-NI Investments	?
Investment Income or Loss		?

Answer 1

As per IFRS-9 if Investments are held with the intention to sell them and earn short term profits, then these are to be valued at Fair value at year end and loss/gain shall be adjusted in Profit and loss Account.

Total Gain/Loss on Revaluation of Investment

Particulars	Amount
Loss on Revaluation due to decrease in Value of Nirmala Shares (38.50-35)*(10350shares-3450shares)	(24150)
Gain on Revaluation due to increase in Value of Oxana Shares (63-60)*5750	17250
Gain on Revaluation due to increase in Value of WTA Shares (32-30.50)*5750	8625
Total Increase due to Revaluation	1725

Journal Entry

Particulars	Debit	Credit
FV-NI Investments	1725
Investment Income or Loss		1725