Reference no: EM132472017

RR Company purchased 12,000 common shares of SS Inc. on January 1, Year 1 for $198,000. SS inc. had 80,000 common shares outstanding. The following information relates to SS Inc.:

                              Net Income (loss)            Dividends paid            Market value/share at December 31

Year 1                           $300,000                     $75,000                      $17.25

Year 2                            $(180,000)                  $40.000                       $18.30

On January 1, Year 3, RR sold Investment in SS Inc. shares for $20 per share.

Required: Show all calculations for full marks

Question i) Prepare the journal entries for years 1, 2 and on January 1, year 3 assuming the following independent scenarios:

a) Investor plans to sell the shares in the short term for profit

b) Elect to use FVTOCI (include closing journal entry on January 1 Year 3)

c) Investor has significant influence

Question ii) How much is the total change in Retained Earnings from January 1, Year 1 to January 1, Year 3 for each scenario? Show all #s for each year to support your total change