E 8-6 Various transactions related to debt and equity securities LO8-4 E 8-8 Various transactions relating to FVTPL investments LO8-3 E 8-9 Various investment securities. OLO8-2 LO8-3 LO8-4 Construction Forms

Company buys securities for sale in the medium and long term when circumstances warrant, not to profit from short-term differences in price and not necessarily to hold debt securities to collect contractual cash flows to maturity. The company applies the irrevocable option permitted under IFRS 9 for equity securities. The following selected transactions relate to investment activities of Construction Forms whose financial year ends on December 31. No investments were held by Construction Forms at the beginning of the year. 2024 Mar. 2 Apr. 12 July 18 Oct. 15 Oct. 16 Nov. 1 Dec. 31 2025 Jan. 23 Mar. 1 Dec.17 Dec. 28 Dec. 31 Purchased 1 million Platinum Gauges ordinary shares for $31 million, including brokerage fees and commissions. 2025 Purchased $20 million of 10% bonds at face value from Zenith Wholesale Corporation. Jan. 5 Received cash dividends of $2 million on the investment in Platinum Gauges ordinary shares. Received semiannual interest of $1 million on the investment in Zenith bonds. Sold the Zenith bonds for $21 million. Required: 1. Prepare the appropriate journal entry for each transaction or event. 2. Show the amounts that would be reported in the company's 2024 income statement relative to these investments. Purchased 500,000 LTD International preference shares for $40 million. including brokerage fees and commissions. Rantzow-Lear Company buys and sells securities expecting to earn profits on short-term differences in price. The company's financial year ends on December 31. The following selected transactions relating Rantzow- Lear's trading account occurred during December 2024 and the first week of 2025. 2024 Recorded the necessary adjusting entry (or entries) relating to the investments. The market prices of the investments are $32 per share for Platinum Gauges and $74 per share for LTD International preference shares. Sold half the Platinum Gauges shares for $32 per share. Sold the LTD International preference shares for $76 per share. Purchased 100,000 Grocers' Supply Company preference shares for $350,000. Received cash dividends of $2,000 from the Grocers' Supply Company preference shares. Recorded any necessary adjusting entry relating to the Grocers Supply Company preference shares. The market price of the share was $4 per share. Sold the Grocers' Supply Company preference shares for $395,000. Required: 1. Prepare the appropriate journal entry for each transaction. 2. Indicate any amounts that Rantzow-Lear Company would report in its 2024 statement of financial position and income statement as a result of this investment. On December 31, 2024, Hull-Meyers Ltd had the following investments that were purchased during 2024, its first year of operations: FVTPL investments: Security A Security B Totals Security C Security D Totals Amortized cost securities: Security F Security E S Cost Required: Determine the following amounts on December 31, 2024. 1. Investments reported as noncurrent assets. 2. Investments reported as noncurrent assets. 3. Fair value gain (or loss) component of income before taxes. 4. Fair value gain (or loss) component of other comprehensive income in shareholders' equity. 900,000 105,000 Fair value through other comprehensive income securities: $1.005.000 900,000 $1,600,000 $ 490,000 Fair Value 615,000 $ $ 700,000 $ 780,000 $1,105,000 910,000 100,000 $1.010.000 915,000 $1.695.000 $ 500,000 610,000 Totals $1.110,000 No investments were sold during 2024. All securities except Security D and Security F are considered as maturing or to be sold within one year from December 31, 2024. No impairment loss events arose during the year. E 8-17 Fair value option; business model to hold to collect GLO8-1 ⒸLO8-2 LO8-3 E 8-27 Provision matrix for trade receivables ⒸLO8-7 E 9-1 Bank loan; accrued interest LO9-2 LO9-3 E 9-9 E 9-11 Warranties LO9-5 ⒸLO9-6 Current-noncurrent classification of debt LO9-1 LO9-4 LO9-5 LO9-6 E 9-16 Disclosures of liabilities Period OLO9-1 through Outstanding E 9-13 Contingent liabilities; product recall LO9-6 Provision rates December 31, 2024 December 31, 2025 30 days or less 0.04% $1,000,000 $1,600,000 (This is a variation of Exercise 8-1 focusing on the fair value option.) Tanner-UNF Company acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July 1, 2024. Company management has the business model of holding to collect contractual cash flows, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment on grounds of "accounting mismatch." The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds December 31, 2024, was $210 million. Required: 1. Would this investment be classified on Tanner-UNF's statement of financial position 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2024. 3. Prepare the journal entries by Tanner-UNF to record interest on December 31, 2024, at the effective interest rate. 4. Prepare any journal entry necessary to recognize fair value changes as of December 31, 2024. 5. At what amount will Tanner-UNF report s investment in the December 31, 2024, statement of financial position? Why? sell the investmen 6. Suppose a bond rating agency downgraded the motivating Tanner-UNF The aging report of trade receivables of Prism Co is as follows. Prism estimates the provision rates based on past experience. 31- 60 days 0.60% $300.000 $670,000 rating of 61- 90 days. 1.35% Determine the loss allowance for Prism's trade receivables as at December 31, 2024, and December 31, 2025. Prepare the journal entry to record the impairment loss for 2024 and 2025. $80,000 $100,000 Required: 1. Prepare the journal entry for the issuance of the note by Quantum Technology. 2. Prepare the appropriate adjusting entry for the note by Quantum on December 31, 2026. 3. Prepare the journal entry for the payment of the note at maturity. amortized cost securities, FVTPL investments, FVOCI securities, significant-influence investments, or other? Explain. Required: How did Sprint report the debt in its statement of financial position? Why? 1. Commercial paper. -2. Noncommitted line of credit. Customer advances. Estimated warranty cost. Item 91- 180 days Sales $55,000 Required: 1. Should this loss be accrued, disclosed only, or neither? Explain. 2. What loss, if any, should Sound Audio report in its 2026 income statement? 3. What liability, if any, should Sound Audio report in its 2026 statement of financial position? 4. Prepare any journal entry needed. 5.00% $79,000 $5,000,000 Indicate (by letter) the most likely way each of the items listed below should reported in a statement On November 1, 2026, Quantum Technology, a geothermal energy supplier, borrowed $16 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine-month, 12% promissory note. Interest was payable a t maturity. Quantum's financial period is the calendar year. An annual report of Sprint Corporation contained a rather lengthy narrative entitled "Review of Segmental Results of Operation." The narrative noted that short-term notes payable and commercial paper outstanding at the end of the year aggregated $756 million and that during the following year "This entire balance will be replaced by the issuance of long-term debt or will continue to be refinanced under existing long-term credit facilities." Required: 1. Does this situation represent a provision? Why or why not? How should Cupola account for it? 2. Prepare journal entries that summarize sales of the awnings (assume all credit sales) and any aspects of the warranty that should be recorded during 2026. 1. What amount should Cupola report as a liability at December 31, 2026? January 2, 20 8. Interest accrued on note, December 31, 2025. 9. Short-term bank loan to be rolled over into a two-year debt after the year-end. 10. A determinable gain that is contingent on a future event that appears likely to occur in three months. 181 days- 1 year Cupola Awning Company introduced a new line of commercial awnings in 2026 that carry a twoyear warranty against manufacturer's defects. Based on their experience with previous product introductions, warranty costs are expected to approximate 4% of sales. Sales and actual warranty expenditures for the first year of selling the product were: Actual Warranty Expenditures $37,500 -5. Accounts payable. 6. Long-term bonds that will be callable by the creditor in the upcoming year unless an existing violation is not corrected (there is a possibility the violation will be corrected within the grace period). -7. Note due March 3, 2026 11. Unasserted assessment of back taxes that probably will be asserted, in which case there would probably be a loss in six months. 50% $20,000 $16,000 12. Unasserted assessment of back taxes with a possibility of being asserted, in which case there would probably be a loss in 13 months. -13. A determinable loss from a past event that is contingent on a future event that appears extremely likely to occur in three months. 14. Bond sinking fund. 15. Long-term bonds callable by the creditor in the upcoming year that are not expected to be called. Sound Audio manufactures and sells audio equipment for automobiles. Engineers notified management in December 2026 of a circuit flaw in an amplifier that poses a potential fire hazard. An intense investigation indicated that a product recall is virtually certain, estimated to cost the company $2 million. The financial year ends on December 31. $190 illion. Prepare the journal entry f financial position at December 31, 2025. >1 year N. Not reported C. Current liability L. Long-term liability D. Disclosure note only A. Asset 100% $6,000 $7,600 sale. Reporting Method Page 666