Frank Corporation invested its excess cash in investments accounted for using the
fair value through other comprehensive income (FV-OCI) model during 2010. At
December 31, 2010, the portfolio consisted of the following common shares:
Investment
# shares
Cost
Fair Value
(and current carrying value)
Lara Inc.
1,000 shares
$13,000
$19,000
Paula Inc.
2,000 shares
42,000
44,000
Aryn Inc.
2,000 shares
72,000
60,000
$127,000
$123,000
Frank Corporation applies the FV-OCI model with unrealized gains and losses
reclassified to retained earnings.
FOR 2010:
a) Make the journal entry at December 31, 2010 to adjust the share
investments to their fair value? (1 marks)
b) What is the balance of accumulated other comprehensive income (AOCI) at
December 31, 2010?
(1 mark)
FOR 2011:
In 2011, Frank Corporation sold 2,000 shares of Paula Inc. for $36,400 less a
$1,250 brokerage fee. In that same year, Frank Corporation purchased 500 more
shares of Lara Inc. for $7,000. Frank Corporation pays no brokerage fees on
share purchases. Aryn Inc. paid Frank Corporation a $1,500 cash dividend.