i)
On January 1, 2020, Palpetine Corporation purchased 60,000 shares of Skywalker Corporation for
$4/share. After this transaction, Palpetine Corporation owns 15% of the shares of Skywalker
Corporation. Palpetine has classified the investment as a fair value through profit or loss investment.
ii)
On February 1, 2020, Palpetine Corporation declared and paid a dividend of $0.25 per share
iii)
On May 1, 2020, Palpetine Corporation purchased an additional 40,000 shares of Skywalker
Corporation for $3.5/share. After this transaction, Palpetine Corporation owns 25% of the shares of
Skywalker Corporation. It was determined that Palpetine Corporation obtained significant influence
of Skywalker Corporation as at May 1, 2020
iv)
On August 1, 2020, Skywalker Corporation declared and paid a dividend of $0.10 per share
v)
Additional Information:
• Skywalker Corporation Net Income May 1, 2020 to December 31, 2020: $500,000
• Skywalker Corporation Share Price as at December 31, 2020: $5/share
• Skywalker Corporation had Net Loss January 1, 2021 to December 31, 2021: ($1,000,000)
• Skywalker Corporation declared bankruptcy on December 31, 2021
Required:
A) Please prepare ALL journal entries for Palpetine Corporation for its investment in Skywalker
Corporation for the year ended December 31, 2020 and December 31, 2021 (7 Points)
B) It was assumed that Palpetine Corporation had significant influence as at May 1, 2020. Other than
percentage of share ownership, what other factors can be used to determine if there is significant
influence? Please provide all 5 IFRS factors. (2 Points)
