Andriana Bessemer, a sole practitioner in a rural area, is working on a client file when one of her most important clients, Richard Wright, walks in. Richard operates one of the largest dairy farms in the region. “Sorry to barge in like this, but I’ve just finished a meeting with my banker. You’ll recall that I need to renew my loans every year. The new bank manager has requested that I make some changes to my statements this year before the bank can process my loan renewal. “The new manager wants me to switch from the cash basis of accounting to the accrual basis. I don’t quite understand the difference. The cash basis provides me with the information I need to evaluate the business, make decisions, and determine our performance for the year—after all, what I make in a year is the cash left over. I know the income tax people will accept either the cash or the accrual basis from farmers, so I don’t understand why I need to change anything. “Also, the manager wants me to value all of my cattle at the current ‘market value.’ I do not see the benefit of doing this, because I will never sell cattle that are still productive. Plus, some of the cattle are for breeding, not for milking. “I know I have to give the bank manager what they want, but I’d really appreciate knowing why the bank is requesting these changes." Required: Assume the role of Andriana Bessemer. Respond to Richard Wright.
> Manufacturing Incorporated (MI) purchased land on 1 January 20X2, which it started to operate as a gravel pit. The gravel pit will be operating for the next 20 years. At the end of the 20 years MI will be required to incur an estimated cost of $5 million
> DesRosier Company acquires a machine on 1 January 20X6, with a non-interest-bearing note that requires $10,000 to be paid on 31 December 20X6 and again on 31 December 20X7. The note has no explicit interest, but the prevailing interest rate is 6% on liab
> Mapleback Inc. recently completed construction of a new manufacturing facility. Prior to the approval of the building permits, the company operated a parking lot on the land. This parking lot had revenues, net of costs, of $50,000. Total construction cos
> Higher Ltd. purchased a large piece of earth-moving equipment for $5,000,000. The vehicle had six tires, each worth $100,000 and expected to last two years. This is the maximum value that should be allocated to tires. The reminder of the purchase cost, i
> Explain how the fundamental qualitative characteristics apply in each of the following situations: 1. A company acquires land in exchange for shares, but the shares are lightly traded and cannot be easily valued. The most recent trades have fluctuated wi
> Lower Ltd. incurred the following expenditures: Oil and filter change on delivery vehicle $ 120 Repair to delivery vehicle after accident 3,500 Painting new delivery vehicle immediately after purchase 700 Repainting building hallway 2,200 Planting summ
> O’Callaghan Inc. (OI) is in the highway construction business. OI’s property, plant, and equipment account includes heavy construction equipment. The following transactions relate to the disposal of two of the company’s pieces of equipment. - Equipment O
> Belle Inc. (BI) purchased a group of assets together from one of its competitors whose owner had recently decided to retire and stop operations. BI paid $500,000 for land, building, equipment, and a patent. Independent appraisals had been completed on al
> Tate Tasers Inc. is preparing interim financial statements for the quarter ending 31 March 20X1 and needs to estimate the value of inventory on hand at the end of the quarter. Physical inventory counts are taken only at the end of the fiscal year. The fo
> In February 20X3, La Fondue Ltd. signed a two-year contract with a Quebec cheese supplier to provide a minimum of 1,000 kilograms of fine cheese for fondue at a fixed price of $20 per kilogram. By the end of September, La Fondue had purchased 650 kg at t
> Purple Corp. had a fire sprinkler go off in a warehouse, damaging 800 units of its regular inventory. Information with respect to the units: - Cost, $52 per unit - Regular selling price, $89 per unit - Estimated selling price once repaired, $42 per unit
> Halicon Ltd. applies the lower of cost or NRV valuation to inventory. The company’s inventory at the end of the year is as follows: Required: Determine the amount of any adjustment that is required to inventory under each of the followi
> Arganon Ltd. had the following ending inventory balances for each of the past six years: Required: For each year, 20X4 through 20X8, determine the holding loss (gain) under lower-of-cost-or-NRV valuation.
> Meter Manufacturing Limited manufactures a component part in high volumes at a manufacturing facility in Hamilton, Ontario. The direct material cost for a unit is $12, direct labour is $18, and variable overhead is $22. Fixed manufacturing overhead for t
> Yarn Imports Corp. is preparing an inventory listing, and is assigning a cost to inventory that arrived on December 29, two days before the end of the year. The following elements of potential cost have been identified: Invoice price; the amount was prep
> Identify the level in the hierarchy that would be most appropriate for measuring the following items using the fair-value hierarchy: Required: Identify the most appropriate value of the hierarchy to measure each item.
> Max Petfood Ltd. is preparing an inventory listing for April 30, its fiscal year-end. The following items have been identified: Description and Cost: Shipment from supplier, arrived in April 29, but inspected, found defective, and will be returned = $43,
> Items: Grapevines Grapefruit (on tree) Grapefruit (picked) Grapefruit juice Hog Hot dogs Sheep Yarn Required: Identify how each item is classified under IFRS and ASPE.
> Item: Wool Beef cattle Apple tree Banana (picked) Orange juice Apple (picked) Apple on tree Pork Cheese Dairy cattle Required: Identify whether each item is a biological asset, agricultural inventory or asset that results from secondary product
> Item Wool Beef cattle Apple tree Banana (picked) Orange juice Apple (picked) Apple on tree Pork Cheese Dairy cattle Required: Identify how each item is classified and measured under IFRS.
> Consider the following two independent errors that were discovered in 20X1 after the 20X0 financial statements were issued. Scenario A Inventory of $123,000 was missed in an inventory count. Scenario B Inventory of $250,000 was counted twice. Required: 1
> Redux Ltd. estimates its quarterly inventory by the retail inventory method. The following data are available for the quarter ended 30 September 20X6: Required: Prepare a schedule to compute the estimated inventory at 30 September 20X6.
> Pepper Ltd. delivers 500 units of product to Salt Corp. The sales price was $125 per unit, and Pepper’s cost was $75 per unit. Pepper has agreed that Salt may return any unused product within 60 days and receive a full refund. Based on historical experie
> 1. When initially recognized, accounts receivables are required to have a valuation allowance based on expected credit losses for their lifetime. 2. For a new company with no history of uncollectible accounts, receivables can be written off when they are
> Using the information from TR7-7 now assume the company is a private company and it has elected to use straight-line amortization. Required: 1. Calculate the present value of the note receivable. 2. Prepare entries for the sale, interest revenue, and cas
> Dharma, a public company, sold a piece of equipment at the beginning of year 1, receiving a $10,000, two-year 2% note. Interest is paid at the end of each year. Market interest rates are assumed to be 10%. Required: 1. Calculate the present value of the
> Indicate whether each of the following statements is true or false: 1. The continuity assumption states that a business entity will last long enough for its assets to be used up and its liabilities settled. 2. The entity basis of reporting is the same as
> Use information from TR7-5. Required: Record all journal entries for the sequence of events assuming the transfer is recorded as a borrowing. Data from TR7-5: Hum Corp. has accounts receivable of $460,000. The company transfers these accounts receivable
> Hum Corp. has accounts receivable of $460,000. The company transfers these accounts receivable to a financial institution. There are no bad debts associated with these accounts receivable. Proceeds of $444,500 are received from the transfer. The transfer
> The unadjusted net accounts receivable on the books of Elantra Ltd. as of 31 December 20X4 are as follows: Accounts receivable $100,000 Less: Allowance for doubtful accounts 10,000 $ 90,000 40% of the accounts are current and 5% might not be collected,
> The accounts of Quickly Company provided the following 20X4 information at 31 December: Accounts receivable balance $600,000 (dr.) Allowance for sales discounts 5,500 (cr.) Allowance for doubtful accounts 40,000 (cr.) In fact, the allowance for sales dis
> 1. Loans and receivables are classified according to their business model. 2. All notes receivables are measured at amortized cost. 3. Overdrafts can be netted against a positive balance in a bank account with any bank. 4. Gains and losses from translati
> Arrow Co. entered into a contract with a customer for $410,000. The contract is for the delivery of equipment and a three-year service maintenance contract for the equipment. Arrow sells separately the equipment for a selling price of $400,000, and the m
> SorCo. Inc. has just entered into a sale agreement with a customer. The contract is for $1,100,000. However, the payments will be made as follows: 1 August 20X1 on date of delivery $500,000; 1 August 20X2 $300,000 and 1 August 20X3 $300,000. SorCo has es
> Rock Gasoline decided to implement a customer loyalty point program. For each litre of fuel sold, the customer earns one point. The points can be accumulated and redeemed later for gas, products in the store, or a car wash. In May, Rock had sales of $60,
> CCS is a construction company that builds roads in the Northwest Territories (NWT). CCS uses the percentage-of-completion method and measures completion on the basis of kilometres completed. In November 20X9, CCS signed an agreement with the NWT governme
> Spreadsheets Made Easy (SME) is a public company that designs and sells spreadsheet software. Corporate customers purchase licences for the number of users in their company who can access the software from their network at any time. The perpetual licence
> Indicate whether each statement is required in IFRS or in ASPE, or in both.
> ELC Inc. sells all types of electronics with a one-year warranty for product assurance on all products sold. On 26 February, a customer came into the store and purchased a television for $1,250. The company estimates, from past experience, that warranty
> Under contract, Sojourn Co. delivers 1,000 units to Customer A for $50 each on 1 April. Sojourn’s documented policy is to allow a customer to return any unused product within 90 days and receive a full refund. The cost of each product is $35. On the basi
> Dress for Success is an upscale dress shop. On 15 August, Sally, a regular customer, came in and put a deposit down on two items: $50 on a dress and $100 on a suit. The deposit was in the amount of $150, which represented 20% of the total retail value of
> Floral Design Co. is a chain of florists located in the Greater Halifax area. Floral Design sells made-to-order bouquets, in-store floral arrangements, and provides design services for events such as weddings and corporate events. They also provide arran
> - The entity assesses the risk, timing, or amount of the entity’s future cash flows expected to change as a result of the contract. - A separate performance obligation is identified for each distinct good or service. - The entity allocates the transact
> Green Equipment Inc. (Green) sells heavy-duty tractors. The 250GT tractor has a stand-alone price of $220,000. Green offers to sell the 250GT inclusive of a five-year service contract intended to cover all repairs and maintenance on the tractor for $235,
> Abateer company provides interior design services for residential and commercial customers. Assume Abateer entered into the following contracts during the year: 1. A contract with a family renovating their home. The contract specifies that Abateer will p
> Paper Supply Ltd. has contracted with a local copy and print centre to provide packages of plain printer paper, as needed, each month. Each package costs $15 and contains 500 sheets of paper. If the copy and print centre purchases over 1,500 packages in
> James Ehnes has recently completed his second year of accounting studies. He has just been hired as a summer intern at the auditing firm of Hetu & Fauré. He feels fortunate to have landed an internship in such a prestigious firm. His supervisor, Venus Ya
> You have been asked to participate in a panel discussion at an accounting conference along with respected academics from around the world. The panel centres on discussion of the IASB’s Conceptual Framework for Financial Reporting. You have been provided
> Sander Persaud is an audit manager for a national public accounting firm. Every summer, the firm recruits several university students as interns. One such intern is Taylor Jay, a high-performing student who has just finished their third year of universit
> Dabika Mulla and Elicia Yang have owned and operated a small gardening centre and landscaping business for the past 10 years. Their business is incorporated as a private corporation. Since there is no market price for their shares, their shareholder agre
> Northern Energy Ltd. (NEL) is a large Canadian private company organized in three operating segments: propane operations, trucking, and mineral explorations. Financial statements have not been audited, and NEL has simply used the cost method for its inve
> Nitrale Corporation (NC) is a Canadian company owned by 3 independent investors: Blakey Straun, Humza Ali, and Xavier Kingston. In October 20X4, NC was formed. The company manufactures the chips that go into radio frequency identification (RFID) tags, wh
> In May 20X1, a group of outdoor enthusiasts formed Wild Ones Ltd. (Wild Ones). Wild Ones operates in central Newfoundland and is involved in a variety of outdoor adventure activities. Start-up capital was provided from an inheritance that one of the owne
> Quinter Corp. (QC) was formed in April 20X5 and funded by five shareholders that are public companies. As such, the shareholders are requiring that QC adopt IFRS even though it is a private company. QC was formed to hold a variety of investments. Quinter
> In February, Huron Ltd. incurred costs to obtain a contract with a customer. The contract is for two years. The following costs were incurred: Travel costs to meet with the customer $10,000 Legal costs to write up the agreement $5,000 Cost of meals $7,00
> You have just been hired as an accounting advisor by Road Safety Inc. (RSI), a company that manufactures road safety equipment (e.g., crash barriers, traffic lights, and electronic information signs). RSI was founded in 20X4 and has grown rapidly over th
> You were recently approached by one of your clients, Wendy Wonders, the chief financial officer of Rock Group Ltd. (RGL), a Canadian public company with a 31 December year-end. RGL manufactures and sells power precision hand tools and accessories, such a
> Bright Lights Ltd. (Bright) is a private company incorporated five years ago by a group of friends who had recently graduated with business or engineering degrees. The group is interested in innovative designs to meet a variety of lighting needs and has
> Juno Corporation (JC) is a Canadian online streaming service that provides access to a wide variety of movies and TV shows. The company has been in operation for the past five years and currently has a subscriber base of five million customers. JC curren
> Winery Inc. (WI) is a private corporation formed in 20X8. Prior to 20X8, WI had been operating as a partnership by the Verity family. Due to their success and desire to expand, they have made the decision to incorporate so that they will have additional
> Glowworm Inc. “I cannot believe you have advised against an employee bonus this year,” exclaimed Jessica Simpson, senior accountant of Glowworm Inc. (GI), as she stormed into the office of the GI chief financial officer on Monday morning. GI is a large,
> Titles Inc. (TI) is a major publisher of books for postsecondary education. TI is a Canadian public corporation. One of TI’s major shareholders is Global Holdings PLC (GHC), a London-based media company. In early 20X4, TI’s executives were preparing a bi
> CBD Inc. (CBD) grows and manufacturers Cannabis sativa plant species and then curates their product into CBD oil. The company was incorporated in 20X6, and operates out of Prince Edward Country, Ontario. CBD Inc. primarily sells its products via online c
> Love Your Pet, Inc. (LPI) is a pet food company located in rural Quebec. LPI has been operating for years as a distributor of pet food but in the last year has begun to manufacture raw dog food. In the current year, LPI has been certified by the Canadian
> Mitrium Corp. is a large privately held company that manufactures frozen ice cream products, which are sold to large and small retailers across North America. The shares of this company are held by 12 individuals, some of them related and some of them no
> Crane Inc. is an agent for Phillips Co. and negotiates sales contracts between Phillips and the final customer for heating and air conditioning units. By agreement, Crane is to receive a commission of 15% on each sale. During the last quarter, Crane nego
> Match the user with the most likely objective. User 1. Bank 2.Small private company 3. Not-for-profit organization 4. Management 5. Shareholders with agreement objective 1. Stewardship 2. Income tax deferral 3. Cash flow prediction 4. Contract Compliance
> The Melville Credit Union has operated in small-town, rural Nova Scotia for the last 27 years. In the summer of 20X4, after decades of operation as a prosperous paper mill, the Lancaster Mersey Mill was abruptly shut down. Lancaster had been a major empl
> Reliable Construction Inc. (RCI) is a public company that sells construction equipment to builders of primarily homes, office buildings, and highways. RCI has been in operation for over 30 years. Up until this year, the company has had profits with the r
> Thomas Technologies Corp. (TTC) is an engineering services company based in Calgary. The company’s Class B common shares are listed on the Toronto Stock Exchange. The Class A common shares are all owned by Theodore Thomas, the company founder, and his im
> Lake Country Ltd. (LCL) is a Canadian manufacturer of outdoor furniture products. LCL manufactures high-quality, durable, and attractive furniture such as outdoor seating, tables, and accessories. LCL sells its products directly to retailers, who in turn
> Pocket Entertainment Group Ltd. (PEG) is an interactive entertainment company that develops mobile apps. Sharleen Williams and her family members own the majority of the 4,000 shares, and have financed all growth through shareholder loans, equity investm
> Solar Power Inc. (SPI) is a public company manufacturing and distributing solar panels. It has been in existence for the past ten years, of which the last three have been as a public company. To date SPI has experienced good growth rates, slightly higher
> Rosy Ltd. (Rosy) is a consumer products company that designs, manufactures, markets, and distributes a diverse portfolio of products, primarily in the recreational and leisure segments. The products enjoy strong positive brand recognition and include suc
> “Frankly, if we continue to grow, we will be out of business soon.” This was the glum assessment of Kathy Lin, President and CEO of Purple Ltd. (Purple), a company that designs, manufactures, and retails womenâ&#
> The owner of Bettany Inc., Mario Sloan, has come to you, a public accountant, for advice. “I am very worried about my business right now. The bank loan is at its maximum level, we have no cash, and my salary is backing up, unpaid. I don
> The management of WPB Ltd. has spent the past year reorganizing the company’s business activities. WPB is a service provider to hospitals. Originally the company operated only in Canada, where hospital care is provided at government expense through publi
> Information related to various financial statement items is provided for two cases: Case A Operating expenses were $500,000. Inventory increased by $72,000, accounts payable increased by $50,000, and prepaid rent decreased by $16,000. Case B Sales revenu
> Wonder Amusements Ltd. (WAL) was incorporated over 40 years ago as an amusement park and golf course. Over time, a nearby city has grown to the point where it borders on WAL’s properties. In recent years WAL’s owners,
> Colour My World Inc. (CMWI) has been operating as a private company for the past 25 years. It manufactures and sells paint. At first, the owners ran only a few retail stores in Northern Ontario, but the company has since expanded with stores across Canad
> T&E Investor Corporation (TEIC) is a holding company with wholly owned interests in the travel and entertainment industry. It is listed on the Toronto Stock Exchange and is subject to the reporting requirements of that exchange and of the Ontario Securit
> Singh Solutions Inc. (SSI) is an Ontario-based manufacturing business that specializes in the production of fire and soundproofing insulation. The company holds public-listed debt, and the family of its founder, Jasmeet Singh, retains control through spe
> International Corp. (IC) is a large Canadian company that has operations around the world that are very diverse. In the past few years they have acquired a number of different companies in a variety of businesses. They have decided this year that it is t
> Dubois Ltd. is a Vancouver-based private company established 30 years ago. Until very recently, all 16 of the shareholders have been relatives of the founder, Blanche Dubois. The company has been profitable in most years. In recent years, however, it has
> On 1 May 20X7, Bertrum Ltd. purchased $1,000,000 of Fox Corp. 6.2% bonds. The bonds pay semi-annual interest each 1 May and 1 November. The market interest rate was 6% on the date of purchase. The bonds mature on 1 November 20X11. Required: 1. Calculate
> On 1 January 20X5, Franco Ltd. purchased $400,000 of Gentron Company 5% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 6% on the date of purchase. The bonds mature on 31 December 20X10. The company ha
> On 1 July 20X2, New Company purchased $600,000 of Old Corp. 5.5% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds mature on 30 June
> On 1 June 20X8, Ghana Company purchased $7,000,000 of Monaco Corp. 5.8% bonds, classified as a FVOCI-Bond investment. The bonds pay semi-annual interest each 30 May and 30 November. The market interest rate was 6% on the date of purchase. The bonds matur
> Selected accounts from the SFP of Norry Ltd. at 31 December 20X4 and 20X5 are presented below. Norry reported earnings of $280,000 in 20X5. There was a new $140,000 of note payable this year that was direct financing (a note issued by the vendor) for a p
> On 1 July 20X8, Sun Company purchased $4,000,000 of Moon Corp. 6.2% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 6% on the date of purchase. The bonds mature on 30 Ju
> Poffer Investments (Poffer) is an investment company. The owners are avid investors that have pooled their money to earn income through their investments. They have a small, but wealthy client base that they manage funds for. All investments are purchase
> Timmins Ltd. owns a number of investments in bonds. Timmins has a 31 December year-end. Case A $3,000,000 bonds in Lakehead Corp. a publicly traded company. The bonds are currently classified as AC with an amortized cost of $3,250,000 as at December 31 a
> Yohan Inc. owns 14,000 shares in Placelid Corporation (represents 10%). Both companies are private entities. The shares were purchased in 20X1 for $20 per share, plus transaction fees of $6,250. In 20X6, Placelid experienced significant challenges with i
> Operators 1 and 2 are both copper mining companies. Operator 1 focuses on drilling and extraction; Operator 2 focuses on the grinding and concentration process (to extract the ore). The companies work together to drill, extract, and partially process the
> On 3 January 20X4, TA Company purchased 2,000 shares of the 10,000 outstanding shares of common stock of UK Corp. for $14,600 cash. TA has significant influence as a result of this acquisition. At that date, the statement of financial position of UK Corp
> On 2 January 20X5, Junction Ltd., a private company, purchased 90,000 of the 100,000 outstanding common shares of Wicket Corporation for $12 per share. The remaining 10,000 shares are owned by an investor. Transactions costs totalled $12,500. During 20X5
> On 1 January 20X8, Khalil Ltd. purchased $2,000,000 of six-year, Harvest Ltd. 5.4% bonds. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 6% on the date of purchase. Khalil is a private company that complies
> Return to the facts of A11-7. Assume now that New Company is a private company that complies with ASPE. Straight-line amortization will be used rather than the effective-interest method. Required: 1. Calculate the price paid by New Company. 2. Construct
> Return to the facts of A11-2. Assume now that the investor is a private company that complies with ASPE. Required: How should the investor classify each of the investments? What accounting method should be used for each? Data from A11-2: For each situat
> Selected accounts from the SFP of Penton Ltd. at 31 December 20X5 and 20X4 are presented below. Penton declared $100,000 of cash dividends during the year, and purchased $200,000 of machinery in direct exchange for common shares. Required: List the items
