Telnor Corporation (Whose Year End Is December 31 of Each

question 24

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, 2018 and 2019 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 2018 and 2019: $$\begin{array} { | l | l | l | l | } \hline \text { Date } & \text { No. Of Shares } & \text { Total } & \text { Cost (per share } \\ \hline \text { March 31, 2018 } & 1,000 & 1,000 & \$ 75 \\\hline \text { June 30, 2018 } & 1,000 & 2,000 & \$ 125 \\\hline \text { September } 30,2018 & 1,000 & 3,000 & \$ 175 \\\hline \text { September } 30,2019 & ( 3,000 ) & 0 & \$ 240 \\\hline\end{array}$$ Assume that Telnor accounts for its investment in Pineapple Corp. at fair value through other comprehensive income.
Required:
(a) Prepare the journal entries to record the transactions in 2018 and 2019 with respect to Telnor's investment in Pineapple.
(b) How would Telnor disclose the investment in Pineapple on its balance sheet?
Unrealized gain at December 31, 2018 (3,000 * $200) - $375,000 = $225,000

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Definitions:

Credibility

The quality of being trusted and believed in, important in financial reporting and accounting practices.

Net Sales

The sum of sales income left over after subtracting returns, allowances for damaged or missing goods, and discounts.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor expenses.

Income Statement

It's a financial statement that shows a company's revenues, expenses, and profits or losses over a specific period.