Telnor Corporation (Whose Year End Is December 31 of Each

question 16

Essay

Telnor Corporation (whose year end is December 31 of each year) has made a series of investments in Pineapple Corp., one of their major customers. The management of Telnor has been impressed by the products produced and sold by Pineapple and their market success. These investments are only going to be held for a short period of time. The market price of Pineapple stock on December 31, 2019 and 2020 was $200 and $250 respectively per share. Dividends of $1.00 per share were declared and paid on December 31 of each year. The following are the purchases and sales that Telnor entered into in 2019 and 2020:
$\begin{array}{|l|r|r|r|}\hline \text { Date } & \text { No. Of Shares } & \text { Total } & \text { Cost (per share) } \\\hline \text { March 31,2019 } & 1,000 & 1,000 & \$ 75 \\\hline \text { Tune 30,2019 } & 1,000 & 2,000 & \$ 125 \\\hline \text { September 30, 2019 } & 1,000 & 3,000 & \$ 175 \\\hline \text { September 30, 2020 } & (3,000) & 0 & \$ 240 \\\hline\end{array}$ Assume that Telnor accounts for its investment in Pineapple Corp. at fair value through profit and loss (FVTPL).
Required:
(a) Prepare the journal entries to record the transactions in 2019 and 2020 with respect to Telnor's investment in Pineapple.
(b) How would Telnor disclose the investment in Pineapple on its balance sheet?
$\begin{array}{|l|r|r|r|r|}\hline \text { Date } & \text { No. Of Shares } & \text { Total } & \text { Cost (per share) } & \text { Total Cost } \\\hline \text { March } 31,2019 & 1,000 & 1,000 & \$ 75 & \$ 75,000 \\\hline \text { June 30,2019 } & 1,000 & 2,000 & \$ 125 & \$ 200,000 \\\hline \text { September 30,2019 } & 1,000 & 3.000 & \$ 175 & \$ 375,000 \\\hline\end{array}$

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Definitions:

Liability

The legal responsibility to settle debts or obligations, which may arise from contracts, torts, or statutory duties.

Management Duties

The responsibilities and tasks assigned to the management of an organization, including decision-making, planning, staffing, directing, and controlling.

Limited Partners

Individuals in a partnership who invest money but are not involved in day-to-day management, and whose liability is limited to the amount of their investment.

General Partnership

A business structure where two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a venture.