UNIVERSITAS INDONESIA Praktikum Akuntansi Keuangan

Program Pendidikan Vokasi

Genap 2023/2024

PERTANYAAN PEMICU
TOPIK 3 : INVESTMENT

1. On January 1, 2022, Garfield AG made an investment in €100,000 of the 9%, 5-year

bonds of Chester Corporation for €92,608, which provides an 11% return. Garfield
plans to hold these bonds to collect contractual cash flows. Prepare Garfield’s
journal entries for (a) the purchase of the investment, (b) the receipt of annual
interest on December 31, 2022 and discount amortization. And (c) the reporting of
investment in financial statements. (10%)
2. Use the information from number 1, but assume the bonds are purchased as a held-
for-collection and selling investment. Prepare Garfield’s journal entries for (a) the
purchase of the investment, (b) the receipt of annual interest and discount
amortization, (c) the year-end fair value adjustment. (Assume a zero balance in the
Fair Value Adjustment account.) The bonds have a year-end fair value of €95,000.
And, the reporting in the financial statements. (15%)
3. Use the information from number 1, but assume Garfield plans to actively trade the
bonds to profit from market interest rate changes. Prepare Garfield’s journal entries
for (a) the purchase of the investment, (b) the receipt of annual interest and
discount amortization, (c) the year-end fair value adjustment. The bonds have a
year-end fair value of €95,000. And, (c) the reporting in the financial statements.
(15%)
4. Hillsborough Co. has a held-for-collection investment in the bonds of Schuyler Corp.
with a carrying (and fair) value of $90,000. The investment has a term of six years,
with annual interest payment at 8%, paid at the end of each year. Due to poor
economic prospects for Schuyler, Hillsborough determined that it will not be able to
collect all contractual cash flows and the bonds have decreased in value to $75,000.
It is determined that this is a permanent loss in value. Prepare the journal entry, if
any, to record the reduction in value. And, the reporting in financial statement (10%)
5. Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as an
investment for £13,200. During the year, Sherman paid a cash dividend of £3.25 per
share. At year-end, Sherman shares were selling for £34.50 per share. Prepare
Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the
dividends received, and (c) the fair value adjustment, in the following two
assumptions: (10%)
1) If the ordinary shares are Trading Investment
2) If the ordinary shares are Non-Trading Investment

6. On January 1, 2022, Meredith plc purchased 23% of the ordinary shares of Pirates
Company for £175,000. During the year, Pirates earned net income of £95,000 and
paid dividends of £21,850. Prepare the entries for Meredith to record the purchase
and any additional entries related to this investment in Pirates Company in 2022.
UNIVERSITAS INDONESIA Praktikum Akuntansi Keuangan
Program Pendidikan Vokasi
Genap 2023/2024

7. At December 31, 2022, the equity investment portfolio HFCS for Wenger, Inc.
is as follows.

Unrealized Gain
Investment Cost Fair Value (Loss)
A 17500 15000 -2500
B 12500 14000 1500
C 23000 25500 2500
53000 54500 1500
Previous fair value adjustment balance - Debit 200
Fair value adjustment - Debit 1300

On January 20, 2023, Wenger, Inc. sold investment A for $15,300. The sale proceeds
are net of brokerage fees. Prepare the adjusting entry at December 31, 2023, to
report the portfolio at fair value. And, show the financial statements presentation of
the investment-related accounts at December 31, 2023. The fair value of investment
B & C are 15,000 & 26,000 and net income in 2023 is 350,000 (20%)

8. Cameron Company has a portfolio of 8% debt investments that it has

managed as a trading investment. At December 31, 2022, Cameron had the
following balances related to this portfolio: debt investments, £250,000; fair
value adjustment, £10,325 (Dr). Cameron management decides to change its
business model for these investments to a held-for-collection strategy,
beginning in January 2023. Prepare the journal entry to transfer these
investments to the held-for-collection classification. (10%)

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