Reference no: EM132939085

Pina Colada Inc. follows IFRS. Pina Colada holds a variety of investments, some of which are accounted for at fair value through net income and some of which are accounted for at fair value through other comprehensive income.

On January 1, 2020, the beginning of the fiscal year, Pina Colada's accounts and records include the following information:

                                                                                                          Cost                   Market Value
Fair value through net income investments                          $64,000                     $64,000
Fair value through other comprehensive income investments    $73,500                       $73,500

• Market values for the FV-NI investments and FV-OCI investments at December 31, 2020, were $62,500 and $78,400, respectively. Computers that are used to track investment performance were purchased during 2020 for $12,000. For tax purposes, assume the computers are in Class 10 with a CCA rate of 30% (assume the Accelerated Investment Incentive applies to these computers). Depreciation expense for the year was $2,400. Pina Colada recorded meals and entertainment expenses of $24,200 related to "wining and dining" clients. The CRA allows 50% of these costs as a deductible business expense.
• Pina Colada's income before income tax for 2020 is $128,000. This amount does not include any entries to adjust investments to market values at December 31, 2020. Pina Colada's tax rate for 2020 is 25%, although changes enacted in tax legislation before December 31, 2020 will result in an increase in this rate to 30% for 2021 and subsequent taxation years. Assume that these rates apply to all income that is reported. There were no deferred tax accounts at January 1, 2020.

Problem 1: Prepare journal entries to reflect the difference between the carrying amount and market value for the above investments at Pina Colada's year end of December 31, 2020.