Reference no: EM132756777
Question - On January 3, 2020, Grouper Limited purchased 3,700 (37%) of the common shares of Sonja Corp. for $548,950. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition:
Carrying Amount Fair Value
Assets not subject to depreciation $513,000 $513,000
Assets subject to depreciation (10 years remaining) 834,000 944,000
Total identifiable assets 1,347,000 1,457,000
Liabilities 112,000 112,000
During 2020, Sonja reported the following information on its statement of comprehensive income:
Income before discontinued operations $206,000
Discontinued operations (net of tax) (73,900)
Net income and comprehensive income 132,100
Dividends declared and paid by Sonja November 15, 2020 71,000
Assume that the 37% interest is enough to make Sonja an associate of Grouper, and that Grouper is required to apply IFRS for its financial reporting. The fair value of Sonja's shares at December 31, 2020, is $150 per share.
Required -
1. Record all necessary journal entries associated with Grouper's investment in Sonja for 2020. Depreciable assets are depreciated on a straight-line basis.
2. Prepare the journal entry if you were informed that Grouper's long-term business prospects had deteriorated and that the most Grouper could expect to recover in the future or to sell its investment in Sonja for at December 31, 2020, is $119 per share.