Question: Cornwall Inc., a publicly accountable enterprise

> The before-tax income for Hawks Corp. for 2016 was $101,000; for 2017, it was $77,400. However, the accountant noted that the following errors had been made: 1. Sales for 2016 included $38,200 that had been received in cash during 2016, but for which the

> Neilson Tool Corporation’s December 31 year-end financial statements contained the following errors: An insurance premium of $66,000 covering the years 2016, 2017, and 2018 was prepaid in 2016, with the entire amount charged to expens

> A partial trial balance of Lindy Corporation at December 31, 2017 follows: Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2017 totaled $3,400. Through an oversight, the Salaries and Wages Payable account was not chan

> You have been engaged to review the financial statements of Walsh Corporation. In the course of your examination of the work of the bookkeeper hired during the year that just ended, you noticed a number of irregularities for the past fiscal year: 1. Year

> Tracy Ltd. purchased a piece of equipment on January 1, 2013 for $1.2 million. At that time, it was estimated that the machine would have a 15-year life and no residual value. On December 31, 2017, Tracy’s controller found that the entry for depreciation

> Carly Inc. reported the following accounting income (loss) and related tax rates during the years 2012 to 2018: Accounting income (loss) and taxable income (loss) were the same for all years since Carly began business. The tax rates from 2015 to 2018 w

> The following information relates to Shirley Corporation’s transactions during 2017, its first year of operations. 1. Income before income tax on the income statement for 2017 was $64,000. 2. Income before income tax ($64,000 above) is net of loss due to

> The following information was disclosed during the audit of Shawna Inc.: 1. On January 1, 2017, equipment was purchased for $400,000. For financial reporting purposes, the company uses straight-line depreciation over a five-year life, with no residual

> Anthony Ltd. began business on January 1, 2016. At December 31, 2016, it had a $4,500 balance in the Deferred Tax Liability account that pertains to property, plant, and equipment acquired during 2016 at a cost of $900,000. The property, plant, and equip

> An excerpt from the statement of financial position of Twilight Limited follows: 1. Options were granted/written in 2016 that give the holder the right to purchase 100,000 common shares at $8 per share. The average market price of the companyâ&#1

> Joy Cunningham Co. purchased a machine on January 1, 2014 for $550,000. At that time, it was estimated that the machine would have a 10-year life and no residual value. On December 31, 2017, the firm’s accountant found that the entry for depreciation exp

> Gao Limited, a publicly traded company, uses IFRS and had the following events and transactions occur in its fiscal year ending October 31, 2017. Although no dates are given, the events described are in chronological order. 1. Gao Limited repurchased com

> Isabelle Leclerc is the controller at Camden Pharmaceutical Industries, a public company. She is currently preparing the calculation for basic and diluted earnings per share and the related disclosure for Camden’s external financial sta

> Shari Patel of the controller’s office of Diamond Corporation was given the assignment of determining the basic and diluted earnings per share values for the year ended December 31, 2017. Patel has gathered the following information. 1. The company is au

> Bryce Corporation is preparing the comparative financial statements for the annual report to its shareholders for the fiscal years ended May 31, 2017 and May 31, 2018. The income from operations was $1.8 million and $2.5 million, respectively, for each y

> Tseng Corporation Ltd. has the following capital structure at the following fiscal years ended December 31: The following additional information is available. 1. On July 31, 2017, Tseng Corporation exchanged common shares for a large piece of equipment

> Use the same information for Audrey Inc. as in P17-3, but also assume the following. 1. On September 30, 200,000 convertible preferred shares were redeemed. If they had been converted, these shares would have resulted in an additional 100,000 common shar

> The 2014 financial statements (for its 53-week period ended January 3, 2015) and 10-year financial review of Canadian Tire Corporation, Limited can be found at www.sedar.com or on the company’s website. Instructions: (a) What makes up Canadian Tire’s cu

> Audrey Inc. has 1 million common shares outstanding as at January 1, 2017. On June 30, 2017, 4% convertible bonds were converted into 100,000 additional shares. Up to that point, the bonds had paid interest of $250,000 after tax. Net income for the year

> Loretta Corporation, a publicly traded company, is preparing the comparative financial statements to be included in the annual report to shareholders. Loretta’s fiscal year ends May 31. The following information is available. 1. Income from operations be

> Rocky Mountain Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, was issued at face value, and interest is payable at 7%. The term of the debenture was 10 years, and was issued on December 31, 20

> Gateway Corporation has outstanding 200,000 common shares that were issued at $10 per share. The balances at January 1, 2017 were $21 million in its Retained Earnings account; $4.3 million in its Contributed Surplus account; and $1.1 million in its Accum

> The first audit of the books of Gomez Limited was recently carried out for the year ended December 31, 2017. Gomez follows IFRS. In examining the books, the auditor found that certain items had been overlooked or might have been incorrectly handled in th

> The following information is available for Dylan Inc., a company whose shares are traded on the Toronto Stock Exchange: Other information: 1. For all of the fiscal year 2017, $100,000 of 6% cumulative convertible bonds have been outstanding. The bonds

> Jackie Enterprises Ltd. has a tax rate of 30% and reported net income of $8.5 million in 2017. The following details are from Jackie’s statement of financial position as at December 31, 2017, the end of its fiscal year: Other informat

> The following information is for Polo Limited for 2017: There were no changes during 2017 in the number of common shares, preferred shares, or convertible bonds outstanding. For simplicity, ignore the requirement to book the convertible bondsâ&#1

> As auditor for Checkem & Associates, you have been assigned to review Tao Corporation’s calculation of earnings per share for the current year. The controller, Mac Taylor, has supplied you with the following calculations: You have

> Treeton Inc. had net income for the fiscal year ended June 30, 2017 of $5 million. There were 500,000 common shares outstanding throughout 2017. The average market price of the common shares for the entire fiscal year was $50. Treeton’s tax rate was 25%

> Mavis Corporation is a new audit client of yours and has not reported earnings per share data in its annual reports to shareholders in the past. The treasurer, Andrew Benninger, has asked you to provide information about the reporting of earnings per sha

> Access the audited annual financial statements of Rogers Sugar Inc. for the year ended October 3, 2015 from SEDAR (www.sedar.com) or the company’s website. Instructions: (a) Identify the components of the company’s shareholders’ equity, including the re

> On September 30, 2017, Gargiola Inc. issued $4 million of 10-year, 8% convertible bonds for $4.6 million. The bonds pay interest on March 31 and September 30 and mature on September 30, 2027. Each $1,000 bond can be converted into 80 no par value common

> Manitoba Deck System Corporation (MDSC) is a public company whose shares are actively traded on the Toronto Stock Exchange. The following transactions occurred in 2017: Jan. 1 The company was granted a charter that authorizes the issuance of an unlimited

> Parker Corporation’s charter authorizes the issuance of 1 million common shares and 500,000 preferred shares that have a dividend rate of $6 per share per year. The following transactions involving share issues were completed. Assume that Parker follows

> Pace Instrument Corp., a small company that follows ASPE, began operations on January 1, 2014, and uses a periodic inventory system. The following net income amounts were calculated for Pace under three different inventory cost formulas: Instructions:

> Oregano Inc. was formed on July 1, 2014. It was authorized to issue an unlimited number of common shares and 100,000 shares of cumulative and non-participating preferred shares carrying a $2 dividend. The company has a July 1 to June 30 fiscal year. The

> Perfect Ponds Inc. (PPI) is a backyard pond design and installation company. PPI was incorporated during 2017, with an unlimited number of common shares, and 50,000 preferred shares with a $3 dividend rate authorized. PPI follows ASPE. The following tran

> Some of the account balances of Vos Limited at December 31, 2016 are as follows: The price of the company’s common shares has been increasing steadily on the market; it was $21 on January 1, 2017 and advanced to $24 by July 1 and to $

> On January 1, 2017, Salem Corp. issued $1.1 million of five-year, zero-interest-bearing notes along with warrants to buy 1 million common shares at $22 per share. On January 1, 2017, Salem had 9.3 million common shares outstanding and the market price wa

> Guoping Limited provides you with the following condensed statement of financial position information: Instructions: (a) For each transaction below, indicate the dollar impact (if any) on the following four items: (1) total assets, (2) common shares, (

> Lasson Corp. has 5,000 preferred shares outstanding ($2 dividend), which were issued for $150,000, and 30,000 common shares, which were issued for $550,000. Instructions: The following schedule shows the amount of dividends paid out over the past four y

> Transactions of Kent Corporation are as follows. 1. The company is granted a charter that authorizes the issuance of 150,000 preferred shares and an unlimited number of common shares. 2. The founders of the corporation are issued 10,000 common shares for

> Jeremiah Limited issued 10-year, 7% debentures with a face value of $2 million on January 1, 2010. The proceeds received were $1.7 million. The discount was amortized on the straight-line basis over the 10-year term. The terms of the debenture stated tha

> Thompson Limited, a private company with no published credit rating, completed several transactions during 2017. In January, the company bought under contract a machine at a total price of $1.2 million. It is payable over five years with instalments of $

> On December 31, 2017, Faital Limited acquired a machine from Plato Corporation by issuing a $600,000, non–interest-bearing note that is payable in full on December 31, 2021. The company’s credit rating permits it to borrow funds from its several lines of

> Assume that each item on the following list would have a material effect on the financial statements of a private enterprise in the current year: 1. A change to the income taxes payable method from the future income taxes method 2. A change in the estima

> Selected transactions on the books of Pfaff Corporation follow: May 1, 2017 Bonds payable with a par value of $700,000, which are dated January 1, 2017, are sold at 105 plus accrued interest. They are coupon bonds, bear interest at 12% (payable annually

> In the following two independent cases, the company closes its books on December 31: 1. Armstrong Inc. sells $2 million of 10% bonds on March 1, 2017. The bonds pay interest on September 1 and March 1. The bonds’ due date is September 1, 2020. The bonds

> Venezuela Inc. is building a new hockey arena at a cost of $2.5 million. It received a down payment of $500,000 from local businesses to support the project, and now needs to borrow $2 million to complete the project. It therefore decides to issue $2 mil

> The following amortization and interest schedule is for the issuance of 10-year bonds by Capulet Corporation on January 1, 2017 and the subsequent interest payments and charges. The company’s year end is December 31 and it prepares its

> On June 1, 2017, MacDougall Corporation approached Silverman Corporation about buying a parcel of undeveloped land. Silverman was asking $240,000 for the land and MacDougall saw that there was some flexibility in the asking price. MacDougall did not have

> Daniel Perkins is the sole shareholder of Perkins Inc., which is currently under bankruptcy court protection. As a debtor in possession, he has negotiated a revised loan agreement with United Bank. Perkins Inc.’s $600,000, 10-year, 12% note issued at par

> On January 1, 2017, Batonica Limited issued a $1.2-million, five-year, zero-interest-bearing note to Northern Savings Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2017 Batonica fell into financial trouble due to increased

> In each of the following independent cases, the company closes its books on December 31. 1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2017. The bonds pay interest on September 1 and March 1. The due date of the bonds is September 1, 2020. The b

> Refer to P14-11 and Taylor Corp. Instructions: Repeat the instructions of P14-11 assuming that Taylor Corp. uses the effective interest method. Provide an effective interest table for the bonds for two interest payment periods. Data from P14-11: On Ap

> On December 5, 2013, the Toronto-Dominion Bank (TD) announced, and on January 31, 2014 the bank paid, a stock dividend of one common share for each common share issued and outstanding. Access TD’s December 5, 2013 news release and its financial statement

> On April 1, 2017, Taylor Corp. sold 12,000 of its $1,000 face value, 15-year, 11% bonds at 97. Interest payment dates are April 1 and October 1, and the company uses the straight-line method of bond discount amortization. On March 1, 2018, Taylor extingu

> Four independent situations follow: 1. On March 1, 2017, Wilkie Inc. issued $4 million of 9% bonds at 103 plus accrued interest. The bonds are dated January 1, 2017 and pay interest semi-annually on July 1 and January 1. In addition, Wilkie incurred $27,

> Adventureland Incorporated purchased metal to build a new roller coaster on December 31, 2017. Adventureland provided a $500,000 down payment and agreed to pay the balance in equal instalments of $200,000 every December 31 for five years. Adventureland c

> Ramirez Inc., a publishing company, is preparing its December 31, 2017 financial statements and must determine the proper accounting treatment for the following situations. Ramirez has retained your firm to help with this task. 1. Ramirez sells subscript

> In preparing Sahoto Corporation’s December 31, 2017 financial statements under ASPE, the vice-president, finance, is trying to determine the proper accounting treatment for each of the following situations. 1. As a result of uninsured accidents during th

> Floral Gardens Incorporated is a nationwide chain of garden centres that operates as a private company. In 2017, it issued three new financial instruments. All three of these instruments are new to you (in your role as controller), and you are working on

> Huang Inc., a private business following ASPE, has a contract with its president, Ms. Shen, to pay her a bonus during each of the years 2017, 2018, and 2019. Huang has the practice of paying Ms. Shen her bonus in quarterly payments at the end of March, J

> The following is a payroll sheet for Bayview Golf Corporation for the first week of November 2017. The Employment Insurance rate is 1.88% and the maximum annual deduction per employee is $930.60. The employer’s obligation for Employment

> Sultanaly Limited, a private company following ASPE, pays its office employees each week. A partial list follows of employees and their payroll data for August. Because August is the vacation period, vacation pay is also listed. Assume that the income

> Healy Corp., a leader in the commercial cleaning industry, acquired and installed, at a total cost of $110,000 plus 15% HST, three underground tanks to store hazardous liquid solutions needed in the cleaning process. The tanks were ready for use on Febru

> Matta Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2017 to lease equipment to Irvine Limited. The following information relates to the agreement. 1. The term of the non-cancellable lease

> Hrudka Corp. has manufactured a broad range of quality products since 1988. The operating cycle of the business is less than one year. The following information is available for the company’s fiscal year ended February 28, 2017. Hrudka

> Bian Inc. financed the purchase of equipment costing $85,000 on January 1, 2017 using a note payable. The note requires Bian to make annual $23,971 payments of blended interest and principal on January 1 of the following four years, beginning January 1,

> Hamilton Airlines is faced with two situations that need to be resolved before the financial statements for the company’s year ended December 31, 2017 can be issued. 1. The airline is being sued for $4 million for an injury caused to a child as a result

> Dubois Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2017. Annual rental payments of $41,000 are to be made at the beginning of each lease year (January 31). The insurance and repairs and maint

> Ramey Corporation is a diversified public company with nationwide interests in commercial real estate development, banking, copper mining, and metal fabrication. The company has offices and operating locations in major cities throughout Canada. With corp

> Refer to the information in P20-4. Follow the instructions under the assumption that Situ Ltd. follows IAS 17. Data from P20-4: Refer to the information in P20-3. Instructions: (a) Prepare the journal entries that Situ would make on January 1, 2017 an

> The shareholders’ equity section of Finley Inc. at the beginning of the current year is as follows: Common shares, 1,000,000 shares authorized, 300,000 shares issued and outstanding………………………………………………………………….$3,600,000 Retained earnings………………………………………………

> Refer to the information in P20-3. Follow the instructions under the assumption that Hunter Ltd. follows IAS 17. Data from P20-3: On January 1, 2017, Hunter Ltd. entered into an agreement to lease a truck from Situ Ltd. Both Hunter and Situ use IFRS 16

> On October 30, 2017, Truttman Corp. sold a five-year-old building with a carrying value of $10 million at its fair value of $13 million and leased it back. There was a gain on the sale. Truttman pays all insurance, maintenance, and taxes on the building.

> The head office of North Central Ltd. has operated in the western provinces for almost 50 years. North Central uses ASPE. In 2001, new offices were constructed on the same site at a cost of $9.5 million. The new building was opened on January 4, 2002, an

> You are a senior auditor auditing the December 31, 2017 financial statements of Hoang, Inc., a manufacturer of novelties and party favors and a user of ASPE. During your inspection of the company garage, you discovered that a 2016 Shirk automobile is par

> Use the information for P20-21. Instructions: Under Option 2: (a) Assume that at the signing of the original lease, Sanderson Inc. has no intention of exercising the lease renewal. Determine the classification of the three-year lease for BMW Canada, whi

> Sanderson Inc., a pharmaceutical distribution firm, is providing a BMW car for its chief executive officer as part of a remuneration package. Sanderson has a calendar year end, issues financial statements annually, and follows ASPE. You have been assigne

> Mulholland Corp., a lessee, entered into a non-cancellable lease agreement with Galt Manufacturing Ltd., a lessor, to lease special-purpose equipment for a period of seven years. Mulholland follows IFRS 16 and Galt follows ASPE. The following information

> Fram Fibre glass Corp. (FFC) is a private New Brunswick company, using ASPE, that manufactures a variety of fibre glass products for the fishing and food services industry. With the traditional fishery in decline over the past few years, FFC found itself

> Ali Reiners, a new controller of Luftsa Corp., is preparing the financial statements for the year ended December 31, 2017. Luftsa is a publicly traded entity and therefore follows IFRS. Ali has found the following information. 1. Luftsa has been offering

> Bayberry Corporation performs year-end planning in November each year before its fiscal year ends in December. The preliminary estimated net income following IFRS is $4.2 million. The CFO, Rita Warren, meets with the company president, Jim Bayberry, to r

> You have been asked by a client to review the records of Inteq Corporation, a small manufacturer of precision tools and machines that follows ASPE. Your client is interested in buying the business, and arrangements were made for you to review the account

> Chatham Inc. purchased an option to buy 10,000 of its common shares for $35 each. The option cost $750, and explicitly stipulates that it may only be settled by exercising the option and buying the shares. Instructions: (a) Provide the journal entry req

> Kitchener Corporation has followed IFRS and used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a cash basis because of errors made by an inexperienced b

> Jacobsen Corporation is in the process of negotiating a loan for expansion purposes. Jacobsen’s books and records have never been audited and the bank has requested that an audit be performed and that IFRS be followed. Jacobsen has prep

> On January 1, 2017, Lavery Corp., which follows ASPE, leased equipment to Flynn Ltd., which follows IFRS 16. Both Lavery and Flynn have calendar year ends. The following information concerns this lease. 1. The term of the non-cancellable lease is six yea

> Seneca Corporation, which uses IFRS, has contracted with you to prepare a statement of cash flows. The controller has provided the following information: Additional information related to 2017 is as follows: 1. Equipment that cost $10,500 and was 50% d

> The unclassified statement of financial position accounts for Sorkin Corporation, which is a public company using IFRS, for the year ended December 31, 2016 and its statement of comprehensive income and statement of cash flows for the year ended December

> Bradburn Corporation was formed five years ago through an initial public offering (IPO) of common shares. Daniel Brown, who owns 15% of the common shares, was one of the organizers of Bradburn and is its current president. The company has been successful

> At December 31, 2017, Bouvier Corp. has assets of $10 million, liabilities of $6 million, common shares of $2 million (representing 2 million common shares of $1.00 par), and retained earnings of $2 million. Net sales for the year 2017 were $18 million,

> You are compiling the consolidated financial statements for Vu Corporation International (VCI), a public company. The corporation’s accountant, Timothy Chow, has provided you with the following segment information. Note 7: Major Segment

> Leopard Corporation is currently preparing its annual financial statements for the fiscal year ended April 30, 2017, following IFRS. The company manufactures plastic, glass, and paper containers for sale to food and drink manufacturers and distributors.

> Three independent situations follow. Situation 1 A company received a notice from the provincial environment ministry that a site the company had been using to dispose of waste was considered toxic, and that the company would be held responsible for its

> The following excerpt is from the financial statements of H. J. Heinz Company and provides segmented geographic data: The company is engaged principally in one line of business—processed food products—that represents m

> Brondon Corp. purchased a put option on Mykia common shares on July 7, 2017 for $480. The put option is for 350 shares, and the strike price is $50. The option expires on January 31, 2018. The following data are available with respect to the put option:

> You have completed your audit of Khim Inc. and its consolidated subsidiaries for the year ended December 31, 2017, and are satisfied with the results of your examination. You have examined the financial statements of Khim for the past three years. The co

> Oakridge Leasing Corporation signs an agreement on January 1, 2017 to lease equipment to LeBlanc Limited. Oakridge and LeBlanc follow ASPE. The following information relates to the agreement. 1. The term of the non-cancellable lease is five years, with n

> Radiohead Inc. produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of Radiohead’s financial statements for the year ended December 31, 2017, Marg Zajic, CPA, c