Reference no: EM132462089

On January 3, 2020, Blue Spruce Limited purchased 2,400 (24%) of the common shares of Sonja Corp. for $326,200. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition:

                                                                                      Carrying Amount                 Fair Value

Assets not subject to depreciation                            $462,000                          $462,000

Assets subject to depreciation (10 years remaining)       766,000                           866,000

Total identifiable assets                                           1,228,000                        1,328,000

Liabilities                                                                   98,000                             98,000

During 2020, Sonja reported the following information on its statement of comprehensive income:

Income before discontinued operations                              $242,000

Discontinued operations (net of tax)                                   (70,700)

Net income and comprehensive income                                  171,300

Dividends declared and paid by Sonja November 15, 2020           81,000

Assume that the 24% interest is enough to make Sonja an associate of Blue Spruce, and that Blue Spruce is required to apply IFRS for its financial reporting. The fair value of Sonja's shares at December 31, 2020, is $148 per share.

Question:

Question a) Prepare the journal entry to record Blue Spruce's purchase of the Sonja shares on January 3, 2020. (Hint: Any unexplained payment represents unrecognized goodwill of Sonja.

Question b) Prepare all necessary journal entries associated with Blue Spruce's investment in Sonja for 2020. Depreciable assets are depreciated on a straight-line basis.

1-(To record dividends collected)

2-(To record investment income or loss)

3-(To record amortization of fair value difference)

Question c) Prepare the journal entry if you were informed that Blue Spruce's long-term business prospects had deteriorated and that the most Blue Spruce could expect to recover in the future or to sell its investment in Sonja for at December 31, 2020, is $113 per share.