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KL acquired 2 million $1 equity shares in MN on 18 July 20X0 for $1.65 a share and classified this investment as available for sale (AFS) in accordance with IAS 39 Financial instruments: Recognition andMeasurement.
KL paid a 0.5% transaction fee to its broker on this transaction. MN's shares were trading at $1.78 on 31 December 20X0.
Which of the following journals records the subsequent measurement of this investment at 31 December 20X0?
Suggested Answer: A
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32 comments · newest first
AN
Antonio
10 months ago
2 million shares acquired on July 18, 20X0.
MA
Maddie
10 months ago
Not sure if the AFS method is the best choice here...
AD
Adela
11 months ago
I think the AFS classification is spot on!
TA
Tawny
11 months ago
Wait, shares are at $1.78 now? That's a nice gain!
IZ
Izetta
11 months ago
KL paid $1.65 per share plus a 0.5% fee.
DO
Dottie
11 months ago
I think the fair value is based on the market price at the reporting date, but I can't recall if we need to adjust for the transaction fee again.
LA
Laurel
12 months ago
I feel a bit confused about whether we should recognize the gain in profit or loss or just in other comprehensive income. I hope I remember the right treatment!
SH
Shonda
12 months ago
This question reminds me of a practice one where we had to adjust the carrying amount based on market price. I think we might need to journalize the unrealized gain.
CA
Casey
12 months ago
I remember we discussed how to calculate the fair value of AFS investments, but I'm not sure if we include the transaction fee in the measurement.
ET
Ettie
1 year ago
I'm a bit confused about the transaction fee. Does that get capitalized as part of the cost of the investment or expensed separately? I'll have to review the IAS 39 guidance on that.
CO
Cordell
1 year ago
Okay, I've got this. The key is to recognize the fair value change in other comprehensive income, not profit or loss. I'll double-check my answer before submitting.
TE
Tess
1 year ago
Hmm, I'm a bit unsure about the correct journal entry here. Let me re-read the details carefully and think through the steps.
DY
Dylan
1 year ago
This question seems straightforward. I just need to remember the accounting treatment for available-for-sale investments under IAS 39.
PA
Page
1 year ago
Option C all the way! Unless, of course, you're some kind of accounting wizard who can navigate these IAS regulations with their eyes closed.
TH
Theron
1 year ago
Option C all the way!
MA
Marti
1 year ago
It's definitely tricky!
AN
An
1 year ago
You think so? I might lean towards B.
GE
Georgeanna
1 year ago
Ah, the age-old debate of Profit and Loss vs. Other Comprehensive Income. I'm just glad I don't have to deal with these accounting technicalities in my day-to-day life. Pass the coffee, please!
AS
Ashlyn
1 year ago
I know, accounting can get so complicated sometimes. Here's your coffee.
SH
Sherell
1 year ago
That makes sense, thanks for explaining.
RO
Ronald
1 year ago
This question is a no-brainer. Of course, the answer is Option C! Didn't they teach us this in Accounting 101?
DO
Doyle
1 year ago
I think the answer is Option C as well.
CA
Candra
1 year ago
Because the investment is classified as available for sale, so it should be measured at fair value.
SH
Sherell
1 year ago
Why do you think it's Option C?
KI
Kirk
1 year ago
Option B seems more logical to me. The investment is measured at fair value, so the change in fair value should be recorded in the Profit and Loss account.
SH
Sherly
1 year ago
User3: I also think Option B is the correct journal entry.
AU
Audra
1 year ago
User2: I disagree, I believe Option B is the right choice.
AN
Angella
1 year ago
User1: I think Option A is the correct journal entry.
CA
Candra
1 year ago
I disagree, I believe it should be Option C.
DI
Dion
1 year ago
I think the correct answer is Option C. The investment is classified as available-for-sale, so the subsequent measurement at fair value should be recorded in the Other Comprehensive Income account.
FA
Fausto
1 year ago
I agree with you, Option C is the correct answer. The fair value adjustment for available-for-sale investments goes to Other Comprehensive Income.
SH
Sherell
1 year ago
I think the answer is Option A.