Telnor Corporation (Whose Year End Is December 31 of Each

question 49

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 profit and loss.
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 x $200) - $375,000 = $225,000.

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