94. Collis Company purchased 36,000 common shares of Hoi Company as an investment for $800,000 on January 2, 2013. During 2013, Hoi Company reported net earnings of $625,000 and paid dividends of...

94. Collis Company purchased 36,000 common shares of Hoi Company as an investment for $800,000 on January 2, 2013. During 2013, Hoi Company reported net earnings of $625,000 and paid dividends of $90,000.



Required:


A) Assume that the 36,000 shares represent a 30% interest in Hoi Company.


i) Prepare all necessary journal entries to record the Collis investment in Hoi for 2013.
ii) What is the balance in the Investment in Hoi Company account on Collis' balance sheet as at December 31,

95. On August 1, 2013, Parksville Ltd bought 10,000 shares of Surrey Company's 50,000 shares for $500,000. During the year Surrey reported net income of $100,000 and paid a dividend of $0.50 per share. On July 31, 2014, at Parksville's year-end the estimated fair value of Surrey's shares was $52.50.

Required:


A) Compare and contrast how Parksville's investment in Surrey Company would be reported on their financial statements assuming that:


i) They are able to exercise significant influence, and
ii) They are not able to exercise significant influence and have classified the investment as FVTOCI.


B) If management were paid a bonus based on net income, which method would they prefer? Explain briefly.
C) If the primary objective of the financial statements were to provide them to the bank in support of a loan, which method would they prefer? Explain briefly.