Chapter 9
Investments
468
AP-12B (
1
2
3
)
George Company, a public company, adopted IFRS standards since 2011. It has a year-end of
December 31. The following activities are related to its investments over the course of three
years.
1) On February 2, 2016, George Company acquired 5% of the 1,000,000 outstanding
common shares of Helen Company, for the purpose of short-term trading, at $17.45 per
share.
2) On December 31, 2016, George Company received a cash dividend from Helen Company
for a total of $64,000.
3) On December 31, 2016, Helen Company’s common shares were traded for $16.55 per
share on the local stock exchange.
4) On March 16, 2017, George Company purchased 150,000 of 1,000,000 outstanding
common shares of Siya Company for a market price of $10.00 per share. The purpose of
this investment was to create a business alliance agreement with Siya Company.
5) On December 31, 2017, George Company received a cash dividend payment of $1.28 per
share from Helen Company and $1 per share from Siya Company.
6) The shares of Helen Company and Siya Company were trading at $17.50 and $11.00 per
share respectively on December 31, 2017.
7) On January 31, 2018, George Company sold the investment in Helen Company for
$900,000 cash.
Required
a) Discuss which accounting method should be used by George Company for each type of
investment.
