On July 1, 2016, Tilt Co. exchanged a truck for twenty shares of King Corp.\'s c
ID: 2533935 • Letter: O
Question
On July 1, 2016, Tilt Co. exchanged a truck for twenty shares of King Corp.'s common stock. On that date, the truck's carrying amount was $2,000, and its fair value was $2,500. Also, the book value of King's stock was $50 per share. On December 31, 2016, King had 200 shares of common stock outstanding and its book value per share was $40. What amount should Tilt report in its December 31, 2016 balance sheet as investment in King?
For the Answer, please provide a detailed answer please.
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Explanation / Answer
The initial recognition value of shares would be $2500 . As per IAS 39 / IFRS 9, Financial assets should be recorded at fair value.
As per IAS 39 / IFRS 9, Investment can be classifed into 4 types
The treatment on 31st Dec,2016 depends on how it has been clasified.
If these are classified as Held for tarding/Available for sale, then these shares should be marked to market
However if they are classified as Held to maturity, then only permanent reduction should be recorded.