Dadayeva Inc. has $5 million of 6% convertible bonds outstanding. Each $1,000 bond is convertible into 50 no par value common shares. The bonds pay interest on January 31 and July 31. On July 31, 2017, the holders of $1,250,000 of these bonds exercised the conversion privilege. On that date, the market price of the bonds was 110, the market price of the common shares was $40, the carrying value of the common shares was $20, and the Contributed Surplus—Conversion Rights account balance was $700,000. The total unamortized bond premium at the date of conversion was $362,990. The remaining bonds were never converted and were retired when they reached the maturity date. Assume that the company follows IFRS. Instructions: (a) Assuming that the book value method was used, record the conversion of the $1,250,000 of bonds on July 31, 2017. (b) Prepare the journal entry that would be required for the remaining amount in Contributed Surplus—Conversion Rights when the maturity of the remaining bonds is recorded.
> Financial information for Cao Inc. follows. Instructions: (a) Calculate the following ratios or relationships of Cao Inc. Assume that the ending account balances are representative unless the information provided indicates differently. 1. Current rati
> At December 31, 2017, Reddy Inc. has three long-term debt issues outstanding. The first is a $2.2-million note payable that matures on June 30, 2020. The second is a $4-million bond issue that matures on September 30, 2021. The third is a $17.5-million s
> The following items are found in Bogdan Limited’s financial statements: 1. Interest expense (debit balance) 2. Loss on restructuring of debt 3. Mortgage payable (payable in full in five years) 4. Debenture bonds payable (maturing in two years). The compa
> Koala Inc., a publicly traded company, had 210,000 common shares outstanding on December 31, 2016. During 2017, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For 2017, the company reported net income of $229,690 after
> On January 1, 2018, Khalid Ltd., which follows IAS 17, entered into an eight-year lease agreement for three dryers. Annual lease payments for the equipment are $28,500 at the beginning of each lease year, which ends December 31. Khalid made the first pay
> The following are various accounts: 1. Bank loans payable of a winery, due March 10, 2021 (the product requires aging for five years before it can be sold) 2. $10 million of serial bonds payable, of which $2 million is due each July 31 3. Amounts withhel
> Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31, 2017. The note was issued at par. Because Vargo is in financial trouble, First Trust Inc. agrees to extend the maturity date to December 31, 2019, reduce the princ
> Use the information in E14-24 and the assumptions in E14-26 and answer the following questions related to Green Bank (the creditor). Instructions: (a) What interest rate should Green Bank use to calculate the loss on the debt restructuring? (b) Using ti
> LEW Jewellery Corp. uses gold in the manufacture of its products. LEW anticipates that it will need to purchase 500 ounces of gold in October 2017 for jewellery that will be shipped for the holiday shopping season. However, if the price of gold increases
> Parsons Limited established a share appreciation rights program that entitled its new president, Brandon Sutton, to receive cash for the difference between the shares’ fair value and a pre-established price of $32 (also fair value on December 31, 2016),
> At the end of its fiscal year, December 31, 2017, Javan Limited issued 200,000 share appreciation rights to its officers that entitled them to receive cash for the difference between the fair value of its shares and a pre-established price of $12. The fa
> Barrett Limited established a share appreciation rights program that entitled its new president, Angela Murfitt, to receive cash for the difference between the Barrett Limited common shares’ fair value and a pre-established price of $32 (also fair value
> Anchovy Corp. issued a $1-million, four-year, 7.5% fixed-rate interest only, non prepayable bond on December 31, 2016. Anchovy later decided to hedge the interest rate and change from a fixed rate to variable rate, so it entered into a swap agreement wit
> On January 2, 2017, Yellowknife Corp. issues a $10-million, five-year note at LIBOR, with interest paid annually. To protect against the cash flow uncertainty related to interest payments that are based on LIBOR, Yellowknife entered into an interest rate
> On January 2, 2017, Thompson Corp. issued a $100,000, four-year note at prime plus 1% variable interest, with interest payable semi-annually. On the same date, Thompson entered into an interest rate swap where it agreed to pay 6% fixed and receive prime
> Instructions: Refer to the data and other information provided in E20-21, but now assume that Fine’s fiscal year end is May 31. Prepare the journal entries on Fine Corp.’s books to reflect the lease signing and to record payments and expenses related to
> On January 1, 2017, Kasan Corp. granted stock options to its chief executive officer. This is the only stock option that Kasan offers and the details are as follows: On January 1, 2022, 2,000 of the options were exercised when the fair value of the com
> Gogeon Inc. is publicly traded and uses a calendar year for financial reporting. The company is authorized to issue 50 million common shares. At no time has Gogeon issued any potentially dilutive securities. The following list is a summary of Gogeon’s co
> On January 1, 2017, Waldorf Corporation granted 40,000 options to key executives. Each option allows the executive to purchase one share of Waldorf’s common shares at a price of $30 per share. The options were exercisable within a two-year period beginni
> Brush Inc. recently purchased Paint Pro, a large home-painting corporation. One of the terms of the merger was that if Paint Pro’s net income for 2018 was $110,000 or more, 10,000 additional shares would be issued to Paint’s shareholders in 2019. Paint P
> On December 31, 2017, Master Corp. had a $10-million, 8% fixed-rate note outstanding that was payable in two years. It decided to enter into a two-year swap with First Bank to convert the fixed-rate debt to floating-rate debt. The terms of the swap speci
> Howard Corporation earned $480,000 during a period when it had an average of 100,000 common shares outstanding. The common shares sold at an average market price of $23 per share during the period. Also outstanding were 18,000 warrants that could each be
> Standard Corp’s net income for 2017 is $150,000. The only potentially dilutive securities outstanding were 1,000 call options issued during 2016, with each option being exercisable for one share at $20. None have been exercised, and 30,000 common shares
> Hayward Corporation had net income of $50,000 for the year ended December 31, 2017, and weighted average number of common shares outstanding of 10,000. The following information is provided regarding the capital structure: 1. 7% convertible debt, 200 bon
> Use the same information as in E17-13, except for the changes in part (c). Assume instead that 40% of the convertible bonds were converted to common shares on April 1, 2017. Instructions: (a) Calculate Mininova’s weighted average common shares outstandi
> Mininova Corporation is preparing earnings per share data for 2017. The net income for the year ended December 31, 2017 was $400,000 and there were 60,000 common shares outstanding during the entire year. Mininova has the following two convertible securi
> On January 1, 2017, Fine Corp., which follows IAS 17, signs a 10-year, non-cancellable lease agreement to lease a specialty loom from Sheffield Corporation. The following information concerns the lease agreement. 1. The agreement requires equal rental pa
> On January 1, 2017, Draper Inc. issued $4 million of face value, fi ve-year, 6% bonds at par. Each $1,000 bond is convertible into 20 common shares. Draper’s net income in 2017 was $200,000, and its tax rate was 25%. The company had 100,000 common shares
> Ottey Corporation issued $4 million of 10-year, 7% callable convertible subordinated debentures on January 2, 2017. The debentures have a face value of $1,000, with interest payable annually. The current conversion ratio is 14:1, and in two years it will
> On June 1, 2015, Gustav Corp. and Gabby Limited merged to form Fallon Inc. A total of 800,000 shares were issued to complete the merger. The new corporation uses the calendar year as its fiscal year. On April 1, 2017, the company issued an additional 400
> On January 1, 2017, Manfred Manufacturers had 300,000 common shares outstanding. On April 1, the corporation issued 30,000 new common shares to raise additional capital. On July 1, the corporation declared and distributed a 10% stock dividend on its comm
> The following are unrelated transactions. 1. On March 1, 2017, Loma Corporation issued $300,000 of 8% non-convertible bonds at 104, which are due on February 28, 2037. In addition, each $1,000 bond was issued with 25 detachable stock warrants, each of wh
> Vanstone Corp., a public company, adopted a stock option plan on November 30, 2017 that designated 70,000 common shares as available for the granting of options to officers of the corporation at an exercise price of $8 a share. The market value was $12 a
> The following situations occur independently. 1. A company knows that it will require a large quantity of euros to pay for some imports in three months. The current exchange rate is satisfactory, and as a result, the company purchases a forward contract
> Cambridge Ltd. paid $250 for the option to buy 1,000 of its common shares for $15 each. The contract stipulates that it may only be settled by exercising the option and buying the shares. Cambridge Ltd. follows IFRS. Instructions: (a) Provide the journa
> On January 1, 2017, Fresh Juice Ltd. entered into a purchase commitment contract to buy 10,000 oranges from a local company at a price of $0.50 per orange anytime during the next year. The contract provides Fresh Juice with the option either to take deli
> On April 1, 2017, Petey Ltd. paid $175 for a call to buy 700 shares of NorthernTel at a strike price of $27 per share any time during the next six months. The market price of NorthernTel’s shares was $27 per share on April 1, 2017. On June 30, 2017, the
> Refer to the financial statements and accompanying notes of Canadian Tire Corporation Limited for its year ended January 3, 2015. The financial statements are available on SEDAR (www.sedar.com). Instructions: (a) What are the issued and authorized share
> On January 2, 2017, Jackson Corporation purchased a call option for $500 on Walter’s common shares. The call option gives Jackson the option to buy 1,000 shares of Walter at a strike price of $30 per share any time during the next six months. The market
> Refer to E16-2. Assume the same facts except that the forward contract is a futures contract that trades on the Futures Exchange. On January 1, 2017, Roper is required to deposit $65 with the stockbroker as a margin. Instructions: (a) Prepare the journa
> On January 1, 2017, Roper Inc. agrees to buy 3 kilos of gold at $40,000 per kilo from Golden Corp on April 1, 2017, but does not intend to take delivery of the gold. On the day that the contract was entered into, the fair value of this forward contract w
> On November 1, 2016, Aymar Corp. adopted a stock option plan that granted options to key executives to purchase 45,000 common shares. The options were granted on January 2, 2017, and were exercisable two years after the date of grant if the grantee was s
> On January 1, 2017, Tiamund Corp. sold at 103, 100 of its $1,000 face value, five-year, 9% non-convertible, retractable bonds. The retraction feature allows the holder to redeem the bonds at an amount equal to three times net income, to a maximum of $1,2
> On September 1, 2017, Oxford Corp. sold at 102 (plus accrued interest) 5,200 of its $1,000 face value, 10-year, 9% non-convertible bonds with detachable stock warrants. Each bond carried two detachable warrants; each warrant was for one common share at a
> The treasurer of Hing Wa Corp. has read on the Internet that the stock price of Ewing Inc. is about to take off. In order to profit from this potential development, Hing Wa purchased a call option on Ewing common shares on July 7, 2017 for $480. The call
> On January 1, 2017, Olson Corporation issued $6 million of 10-year, 7% convertible debentures at 104. Investment bankers believe that the debenture would have sold at 102 without the conversion privilege. Interest is to be paid semi-annually on June 30 a
> Somerton Corporation had two issues of securities outstanding: common shares and a 6% convertible bond issue in the face amount of $6 million. Interest payment dates of the bond issue are June 30 and December 31. The conversion clause in the bond indentu
> On January 1, 2017, when the fair value of its common shares was $80 per share, Hammond Corp. issued $10 million of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five comm
> Rancour Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2017, it signed a 15-year lease with its Municipal Industrial Commission (MIC). The property has a total fair value of $450,000 on March 30,
> Vargo Limited had $2.4 million of bonds payable outstanding and the unamortized premium for these bonds amounted to $44,500. Each $1,000 bond was convertible into 20 preferred shares. All bonds were then converted into preferred shares. The Contributed S
> Daisy Inc. issued $6 million of 10-year, 9% convertible bonds on June 1, 2017 at 98 plus accrued interest. The bonds were dated April 1, 2017, with interest payable April 1 and October 1. Bond discount is amortized semi-annually. Bonds without conversion
> RIT Co. has an investment of 5,000 shares in a public company, SIT Ltd. In October 2017, RIT Co. purchased 5,000 put options for SIT Ltd. shares at a price of $2 per put option. The strike price associated with the put options is $100 per share, which is
> The common shares of Hoover Inc. are currently selling at $143 per share. The directors want to reduce the share price and increase the share volume before making a new issue. The per share carrying value is $34. There are currently 1 million shares issu
> The following data were taken from the statement of financial position accounts of Bedard Corporation on December 31, 2017: Current assets……………………………………………………………………………………………………$1,040,000 FV-NI investments………………………………………………………………………………………………….824,000 Com
> The following is the shareholders’ equity section of Suozzi Corp. at December 31, 2017: Instructions: (a) No dividends were paid in 2015 or 2016. On December 31, 2017, Suozzi wants to pay a cash dividend of $4 per share to common shar
> The books of Binkerton Corporation carried the following account balances as at December 1, 2017: The preferred shares have dividends in arrears for the past year (2016). On December 21, 2017, the board of directors declared the following: The current
> McNamara Limited’s ledger shows the following balances on December 31, 2017: Preferred shares outstanding: 25,000 shares……………………………..$ 625,000 Common shares outstanding: 40,000 shares……………………………..3,000,000 Retained earnings………………………………………………………………………890
> The outstanding share capital of Meadowcrest Corporation consists of 3,000 shares of preferred and 7,000 common shares for which $280,000 was received. The preferred shares carry a dividend of $7 per share and have a $100 stated value. Instructions: Ass
> Instructions: Refer to the data and other information provided in E20-1, but now assume that Maleki’s fiscal year end is May 31. Prepare the journal entries on Maleki Corp.’s books to reflect the signing of the lease agreement and to record payments and
> Stankovic Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the firs
> As of December 31, 2016, Cayenne Ltd., a public company, has 40,000 common shares outstanding. During 2017, Cayenne had the following transactions. 1. Issued 6,000 common shares at $29 per share, less $2,000 in costs related to the issuance of the shares
> Use the same information as in E14-24 but assume now that Green Bank reduced the principal to $1.6 million rather than $1.9 million. On January 1, 2021, Troubled Inc. pays $1.6 million in cash to Green Bank for the principal. The market rate is currently
> Assume the same information as in E14-24 and answer the following questions related to Green Bank (the creditor). Green Bank prepares financial statements in accordance with IFRS 9. There is no evidence of a significant increase in credit risk and 12-mon
> On December 31, 2017, Green Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2-million, 12% note receivable issued at par by the following modifications: 1.
> Strickland Inc. owes Heartland Bank $200,000 plus $18,000 of accrued interest. The debt is a 10-year, 10% note. During 2017, Strickland’s business declined due to a slowing regional economy. On December 31, 2017, the bank agrees to accept an old machine
> On December 31, 2016, Mohr Inc. borrowed $81,241 from Par Bank, signing a $125,000, five-year, non–interest-bearing note. The note was issued to yield 9% interest. Unfortunately, during 2017 Mohr began to experience financial difficulty. As a result, thi
> Jyoti Inc. had outstanding $10 million of 8% bonds (interest payable March 31 and October 31) due in 12 years. Jyoti was able to reduce its risk rating through investing in more real estate. As a result, on September 1, it issued $5 million of 10-year, 6
> Laurentian Mills Ltd. had the following shareholders’ equity at January 1, 2017. The contributed surplus accounts arose from amounts received in excess of the par value of the shares when issued. During 2017, the following transaction
> The condensed balance sheets of Rockford Limited, a small private company that follows ASPE, follow for the periods immediately before, and one year after, it had completed a financial reorganization: For the year following the financial reorganization
> On September 15, 2017, Local Camping Limited, the lessee, entered into a 20-year lease with Sullivan Corp. to rent a parcel of land at a rate of $30,000 per year. Both Local and Sullivan use ASPE. The annual rental is due in advance each September 15, be
> Callaghan Inc. decided to sell shares to raise additional capital so that it could expand into the rapidly growing service industry. The corporation chose to sell these shares through a subscription basis and publicly notified the investment world. The o
> The following account balances are available from the ledger of Yutao Shui Corporation on December 31, 2016: Common Shares (20,000 shares authorized and outstanding)………………..$1,000,000 Retained Earnings (Deficit)……………………………………………………………………(190,000) On Ja
> What follows are the liabilities and shareholders’ equity sections of the statements of financial position for Kao Corp. and Bennington Corp. Each has assets totaling $4.2 million. For the year, each company has earned the same income
> Brubacher Corporation’s post-closing trial balance at December 31, 2017 was as follows: At December 31, 2017, Brubacher had the following numbers for its common and preferred shares: The dividends on preferred shares are $5 cumulati
> The following are selected transactions that may affect shareholders’ equity. 1. Converted bonds to common shares. 2. Declared a cash dividend. 3. Effected a stock split. 4. Recorded the expiration of insurance coverage that was previou
> Sunshine Incorporated provides solar energy services to Toronto. Sunshine needed to buy additional solar energy panels to meet the demand for its energy product. The government of Ontario offered an interest-free forgivable loan to Sunshine in the amount
> On January 1, 2017, Copeland Ltd. (a public company) had the following shareholders’ equity accounts: Preferred shares, $5 non-cumulative, unlimited number authorized, none issued………….–0– Common shares, unlimited number authorized, 800,000 issued…………………
> Miss M’s Dance Studios Ltd. is a public company, and accordingly uses IFRS for financial reporting. The corporate charter authorizes the issuance of an unlimited number of common shares and 50,000 preferred shares with a $2 dividend. At the beginning of
> Falkon Corp. reported the following amounts in the shareholders’ equity section of its December 31, 2016 statement of financial position: Preferred shares, $8 dividend (10,000 shares authorized, 2,000 shares issued)……….$ 200,000 Common shares (unlimited
> Original Octave Inc. (OOI) is a widely held, publicly traded company that designs equipment for tuning musical instruments. Information about its shareholders’ equity is as follows. The preferred share dividend was not paid in 2016. S
> Presented below are five independent situations. All the companies involved use ASPE unless otherwise noted. 1. On December 31, 2017, Zarle Inc. sold equipment to Orfanakos Corp. and immediately leased it back for 10 years. The equipment’s selling price
> The shareholders’ equity accounts of Abbasi Inc. have the following balances on December 31, 2017: Common shares, 400,000 shares issued and outstanding………………..$10,000,000 Contributed surplus…………………………………………………………………………….300,000 Retained earnings……………………
> Singh Inc., a public company, has been experiencing financial difficulty in the past few years. As a result, the common shares have been trading at a per share price of just over $1. If the stock trades at below $1 in the future, the stock exchange would
> Yang Inc. was organized on January 1, 2017. It is authorized to issue an unlimited number of common shares and 100,000 preferred shares with a $4 dividend. The following share transactions were completed during the first year: Jan. 10 Issued 200,000 comm
> Buon Appetito Limited has been experiencing increased customer demand for its specialty food products. In order to meet this demand, the company has bought additional refrigeration units to hold more inventory. To finance this purchase, Buon Appetito iss
> Desrocher Ltd. issued an instalment note on January 1, 2017 (with a required yield of 9%) in exchange for land that it purchased from Safayeni Ltd. Safayeni’s real estate agent had listed the land on the market for $120,000. The note calls for three equa
> Two independent situations follow. 1. On January 1, 2017, Spartan Inc. bought land that had an assessed value of $390,000 at the time of purchase. A $600,000, non–interest-bearing note due on January 1, 2020 was given in exchange. There was no establishe
> On January 1, 2017, Landlord Corporation acquired the following properties: 1. Land and an apartment building in Toronto for $1.5 million. To finance this transaction, Landlord Corporation issued a five-year interest-free promissory note to repay $2,307,
> Foreman Inc. issued $800,000 of 20-year, 10% bonds on January 1, 2017 at 102. Interest is payable semi-annually on July 1 and January 1. The company uses the straight-line method of amortization for any bond premium or discount. Instructions: (a) Prepar
> Foreman Inc. issued $800,000 of 10%, 20-year bonds on January 1, 2017 at 102. Interest is payable semi-annually on July 1 and January 1. Foreman Inc. uses the effective interest method of amortization for any bond premium or discount. Assume an effective
> Two independent situations follow: 1. On January 1, 2017, Divac Limited issued $300,000 of 10-year, 9% bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1. 2. On June 1, 2017, Verbitsky Inc. issued at par, plus accrue
> On January 1, 2017, Hein Corporation sells equipment to Liquidity Finance Corp. for $720,000 and immediately leases the equipment back. Both Hein and Liquidity use ASPE. Other relevant information is as follows. 1. The equipment’s carrying value on Hein’
> Comparative statement of financial position accounts of Jensen Limited, which follows IFRS, appear below: Data from Jensen’s 2017 income statement follow: Additional information: 1. Equipment that cost $10,000 and was 40% depreciate
> Stellar Corp. had the following shareholders’ equity on January 1, 2017: Common shares, unlimited number authorized, 100,000 shares issued and outstanding………………………………………….…………….………….$ 270,000 Contributed surplus…………………………………………………………………..……….310,000 Ret
> On January 2, 2012, Kowalchuk Corporation, a small company that follows ASPE, issued $1.5 million of 10% bonds at 97 due on December 31, 2021. Legal and other costs of $110,000 were incurred in connection with the issue. Kowalchuk Corporation has a polic
> Anaconda Inc. has issued three types of debt on January 1, 2017, the start of the company’s fiscal year: 1. $10 million, 10-year, 13% unsecured bonds, with interest payable quarterly, priced to yield 12% 2. $2.5 million par of 10-year, zero-coupon bonds
> Refer to E14-18 and Auburn Limited. Instructions: Repeat the instructions of E14-18 assuming that Auburn Limited follows IFRS and uses the effective interest method. Provide an effective-interest table for the bonds from the inception of the bond to the
> On June 30, 2010, Auburn Limited issued 12% bonds with a par value of $800,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2017. Because of lower interest rates and a significant change in the company’s cre
> Friedman Corporation had bonds outstanding with a maturity value of $500,000. On April 30, 2017, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these bonds, Friedman had issued other bonds a month earlier
> On June 30, 2017, Mosca Limited issued $4 million of 20-year, 13% bonds for $4,300,920, which provides a yield of 12%. The company uses the effective interest method to amortize any bond premium or discount. The bonds pay semi-annual interest on June 30
