December 31, 2017 consolidated statement of financial position lists property and equipment at $9 billion and total assets of $17.7 billion. Air Canada's Note 4 to the financial statements titled Property and Equipment provides a schedule of the transactions that occurred during the year in four major categories. One category is dedicated to Aircraft and Flight Equipment. Another category is titled Purchase Deposits and Assets under Development (PDAD). Under the latter category, sources of increases are additions and sources of decreases are reclassifications to Aircraft and Flight Equipment. No depreciation is recorded for this category of Property and Equipment. The balance in PDAD at December 31, 2017, was $1,063 million. In Note 4, more details are provided, including a statement that Aircraft and Flight Equipment includes spare engines. The consolidated statement of operations revealed that interest capitalized during 2017 amounted to $36 million. Although not specifically stated, the purchase deposits are likely for the future deliveries of aircraft and related equipment. Air Canada's significant accounting policies are provided in Note 2 to the financial statements. Note 2Q states that spare parts, other than rotables, are included in inventory. Note 2R states that rotables are components that can be repeatedly and economically restored to a fully serviceable condition. In the case of Air Canada, spare engines are rotables. Strict regulations require that engines be used a limited number of flight hours before they must be removed from the aircraft and completely overhauled regardless of their condition. This explains the need for spare engines that are ready for quick replacement, making the aircraft available at all times. Instructions a. For each of the following, provide an argument as to why Air Canada has classified the item under Property and Equipment: 1. Capitalized interest 2. Spare engines 3. Purchase deposits b. Why does Air Canada not record depreciation on Purchase Deposits and Assets under Development? c. Discuss the accounting treatment of the costs to overhaul spare engines. d. If Air Canada were not a public company following IFRS, and instead followed ASPE, would there be any difference in the way it would account for the three items discussed in part (a)? If so, what is the difference?
> On January 1, 2018, Dayan Corporation, a small manufacturer of machine tools, acquired new industrial equipment for $1.1 million. The new equipment had a useful life of five years and the residual value was estimated to be $50,000. Dayan estimates that
> Comco Tool Corp. records depreciation annually at the end of the year. Its policy is to take a full year's depreciation on all assets that are used throughout the year and depreciation for half a year on all machines that are acquired or disposed of dur
> On June 15, 2017, a second-hand machine was purchased for $77,000. Before being put into service, the equipment was overhauled at a cost of $5,200, and additional costs of $400 for direct material and $800 for direct labour were paid in fine -tuning the
> Odyssey Ltd. purchased machinery on January 1, 2020, for $60,000. The machinery is estimated to have a residual value of $6,000 after a useful life of eight years. (a) Calculate the 2020 depreciation expense using the straight-line method. (b) Calculate
> Alladin Company purchased a large piece of equipment on October 1, 2020. The following information relating to the equipment was gathered at the end of October: It is expected that the equipment could be used for 12 years, after which the salvage value w
> Ducharme Corporation purchased electrical equipment at a cost of $12,400 on June 2, 2017. From 2017 through 2020, the equipment was depreciated on a straight-line basis, under the assumption that it would have a 10-year useful life and a $2,400 residual
> Sung Corporation, a manufacturer of steel products, began operations on October 1, 2019. Sung's accounting department has begun to prepare the capital asset and depreciation schedule that follows. You have been asked to assist in completing this schedule
> The following is a schedule of property dispositions for Shangari Corp.: The following additional information is available: Land On February 15, land that was being held mainly as an investment was expropriated by the city. On March 31, another parcel o
> Roland Corporation uses special strapping equipment in its packaging business. The equipment was purchased in January 2019 for $10 million and had an estimated useful life of eight years with no residual value. In early April 2020, a part costing $875,00
> Darby Sporting Goods Inc. has been experiencing growth in the demand for its products over the last several years. The last two Olympic Games greatly increased the popularity of basketballaround the world. As a result, a European sports retailing consort
> Conan Logging and Lumber Company, a small private company that follows ASPE, owns 3,000 hectares of timberland on the north side of Mount Leno, which was purchased in 2008 at a cost of $550per hectare. In 2020, Conan began selectively logging this timbe
> On January 1, 2019, Locke Company, a small machine-tool manufacturer, acquired a piece of new industrial equipment for $1,260,000. The new equipment had a useful life of five years, and the salvage value was estimated to be $60,000. Locke estimates that
> Kitchigami Limited was attracted to the Town of Mornington by the town's municipal industry commission. Mornington donated a plant site to Kitchigami, and the provincial government provided $180,000 toward the cost of the new manufacturing facility. The
> Gilles Corp. purchased a piece of equipment on February l , 2020, for $100,000. The equipment has an estimated useful life of eight years, with a residual value of $25,000, and an estimatedphysical life of 10 years, with no salvage value. The equipment w
> Munro Limited reports the following information in its tax files covering the fiveyear period from 2018 to 2022. All assets are Class 10 with a 30% maximum CCA, and no capital assets had been acquired before 2018. Instructions: a. Prepare a capital cost
> Minute Corp., a Canadian public corporation that follows IFRS, reported the following on its December 31, 2019 statement of financial position: Additional information: 1. The bond amortization table used by Minute Corp. for this bond indicated the follow
> On December 31, 2019, Acker Ltd. reported the following statement of financial position: The accumulated other comprehensive income was related only to the company's non-traded equity investments. Some of these were sold in 2020 for cash, resulting in a
> On January 1, 2020, Melbourne Corporation, a public company following IFRS, acquired 15,000 of the 50,000 outstanding common shares of Noah Corp. for $25 per share. Noah's statement of financial position reported the following information at the date of
> Fellows Inc., a publicly traded manufacturing company in the technology industry, has a November 30 fiscal year end. The company grew rapidly in its first 10 years and made three public offerings over this period. During its rapid growth period, Fellows
> Harper Corporation had the following portfolio of investments at December 31, 2020, that qualified and were accounted for using the FV-OCI method: Early in 2021, Harper sold all the Frank Inc. shares for $17 per share, less a 1 % commission on the sale.
> Brooks Corp. is a medium-sized corporation that specializes in quarrying stone for building construction. The company has long dominated the market, and at one time had 70% market penetration. During prosperous years, the company's profits and conservati
> Octavio Corp. prepares financial statements annually on December 31, its fiscal year end. The company follows IFRS. At December 31, 2020, the company has the account Investments in its general ledger, containing the following debits for investment purcha
> On July 1, 2020, Menard Concrete Ltd. purchased 5% bonds having a maturity value of $50,000 for $48,645.70. The bonds provide the bondholders with a 6% yield. The bonds mature July l, 2023, with interest receivable June 30 and December 31 of each year. M
> The following information relates to the debt securities investments of Wild Company: 1. On February 1, the company purchases 10% bonds of Gibbons Co. having a par value of $300,000 at 100 plus accrued interest. Interest is payable April 1 and October 1.
> Chong Corp. purchased a machine on July 1, 2020, for $30,000. Chong paid $200 in title fees and a legal fee of $100 related to the machine. In addition, Chong paid $500 in shipping charges for delivery, and $400 to a local contractor to build and wire a
> Presented below is information taken from a bond investment amortization schedule, with related fair values provided. These bonds are classified as FV-OCI. Instructions a. Were the bonds purchased at a discount or at a premium? b. Prepare the adjusting e
> On January 1, 2020, Novotna Company purchased $400,000 worth of 8% bonds of Aguirre Co. for $369,114. The bonds were purchased to yield 10% interest. Interest is payable semi-annually, on July 1 and January 1. The bonds mature on January 1, 2025. Novotna
> On December 31 , 2019, Nodd Corp. acquired an investment in GT Ltd. bonds with a nominal interest rate of 10% (received each December 31), and the controller produced the following bond amortization schedule based on an effective rate of approximately 15
> Castlegar Ltd. had the following investment portfolio at January l, 2020: During 2020, the following transactions took place: 1. On March 1, Josie Corp. paid a $2 per share dividend. 2. On April 30, Castlegar sold 300 shares of Asher Corp. for $10 per sh
> The following are the facts for the second question asked of prospective employees. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $15,000 per year for nine years, beginning one year
> Langevin Ltd., which has a calendar year end, entered into an equipment lease on June 1, 2020, with GH Financing Limited. The lease term is two years and requires payments of $3,000 at the end of each month beginning September 30. The stated rate of inte
> James Halabi is a financial executive with McDowell Enterprises. Although James has not had any formal training in finance or accounting, he has a "good sense" for numbers and has helped the company grow from a very small company ($500,000 in sales) to a
> You are hired to review the accounting records of Sheridan Inc. (a public corporation) before it closes its revenue and expense accounts as at December 31, 2020, the end of its current fiscal year. The following information comes to your attention. 1. Du
> Fusters Inc. provides audited financial statements to its creditors and is required to maintain certain covenants based on its debt to equity ratio and return on assets. In addition, management of Fusters receives a bonus partially based on revenues for
> Cameo Manufacturers Inc., a publicly listed company, has two machines that are accounted for under the revaluation model. Technology in Cameo's industry is fast-changing, causing the fair value of each machine to change significantly about every two year
> On October 1, 2020, Ocean Airways Ltd. purchased a new commercial aircraft for a total cost of $100 million. Included in the total cost are the aircraft's two engines, at a cost of $10 million each, and the aircraft's body, which costs $80 million. The e
> On July 1, 2020, Lucas Ltd., a publicly listed company, acquired assets from Jared Ltd. On the transaction date, a reliable, independent valuator assessed the fair values of these assets as follows: The buildings are owned by the company, and the land
> Vidi Corporation, a private enterprise, made the following purchases related to its property, plant, and equipment during its fiscal year ended December 31, 2020. The company uses the straight-line method of depreciation for all its capital assets. 1. In
> On June 28, 2020, in relocating to a new town, Kerr Corp. purchased a property consisting of two hectares of land and an unused building for $225,000 plus property taxes in arrears of $4,500. The company paid a real estate broker a fee of $12,000 for fin
> Kiev Corp. was incorporated on January 2, 2020, but was unable to begin manufacturing activities until July 1, 2020, because new factory facilities were not completed until that date. The Land and Building account at December 31, 2020, contained the foll
> Webb Corporation prepares financial statements in accordance with IFRS. Selected accounts included in the property, plant, and equipment section of the company's statement of financial position at December 31, 2019, had the following balances: During 2
> At December 31, 2019, certain accounts included in the property, plant, and equipment section of Golden Corporation's statement of financial position had the following balances: During 2020, the following transactions occurred: 1. Land site No. 621 was
> Adamski Corporation manufactures ballet shoes and is in a period of sustained growth. In an effort to expand its production capacity to meet the increased demand for its products, the company recently made several acquisitions of plant and equipment. Tan
> Wordcrafters Inc. is a book distributor that had been operating in its original facility since 1991. The increase in certification programs and continuing education requirements in several professions has contributed to an annual growth rate of 15% for W
> Inglewood Landscaping Corp. began constructing a new plant on December l , 2020. On this date, the company purchased a parcel of land for $184,000 cash. In addition, it paid $2,000 in surveying costs and $4,000 for title transfer fees. An old dwelling on
> Donovan Resources Group has been in its plant facility for 15 years. Although the plant is quite functional, numerous repair costs are incurred to keep it in good working order. The book value of the company's plant is currently $800,000, calculated as f
> Fong Limited purchased an asset at a cost of $45,000 on March l, 2020. The asset has a useful life of seven years and an estimated residual value of $3,000. For tax purposes, the asset belongs in CCA Class 8, with a rate of 20%. Calculate the CCA for eac
> On March 1, 2020, Jessi Corp. acquired a 10-unit residential complex for $1,275,000, paid in cash. An independent appraiser determined that 75% of the total purchase price should be allocated to buildings, with the remainder allocated to land. On the dat
> Riverdale Farms Ltd. operates dairy farms. The following are selected transactions that occurred during the fiscal years ended December 31, 2020 and 2021, for one dairy cow and its calf. 1. A calf was born in March 2020. Its fair value less costs to sell
> Milford Company determined its ending inventory at cost and at lower of cost and net realizable value at December 31, 2018, 2019, and 2020, as follows: Instructions a. Prepare the journal entries that are required at December 31, 2019 and 2020, assumin
> Astro Languet established Languet Products Co. as a sole proprietorship on January 5, 2020. At the company's year end of December 31, 2020, the accounts had the following balances (in thousands): A count of ending inventory on December 31, 2020, showed
> The summary financial statements of Langford Landscaping Ltd. on December 31, 2020, are as follows: The following errors were made by the inexperienced accountant on December 31, 2019, and were not corrected. 1. The inventory was overstated by $13,000.
> Halm Skidoos Limited, a private company that began operations in 2017, always values its inventories at their current net realizable value. The company uses ASPE. Its annual inventory figure is arrived at by taking a physical count and then pricing each
> On February 1, 2020, Akeson Ltd. began selling electric scooters that it purchased exclusively from Ionone Motors Inc. Ionone Motors offers volume rebates based on the volume of annual sales to its customers and calculates and pays the rebates at its fis
> In its 2020 annual report, Winkler Limited reports beginning-of-the-year total assets of $1,923 million, end-of-the-year total assets of $2,487 million, total revenue of $2,687 million, and net income of $52 million. (a) Calculate Winkler's asset turnove
> The Eserine Wood Corporation manufactures desks. Most of the company's desks are standard models that are sold at catalogue prices. At December 31, 2020, the following finished desks appear in the company's inventory: The 2020 catalogue was in effect t
> Sier Specialty Corp., a division of FH Inc., manufactures three models of bicycle gearshift components that are sold to bicycle manufacturers, retailers, and catalogue outlets. Since beginning operations in 1969, Sier has used normal absorption costing a
> The following independent situations relate to inventory accounting: Primary Guidance Under IFRS 1. Sanderson Company's inventory of $1.1 million at December 31, 2020, was based on a physical count of goods priced at cost and before any year-end adjustme
> Desrosiers Ltd. had the following long-term receivable account balances at December 31, 2019: Transactions during 2020 and other information relating to Desrosiers' long-term receivables were as follows: 1. The $1.8-million note receivable is dated May
> On December 31, 2020, Zhang Ltd. rendered services to Beggy Corp. at an agreed price of $91,844.10. In payment, Zhang accepted $36,000 cash and agreed to receive the balance in four equal installments of $18,000 that are due each December 31. An interest
> On October 1, 2020, Healy Farm Equipment Corp. sold a harvesting machine to Homestead Industries. Instead of a cash payment, Homestead Industries gave Healy Farm Equipment a $150,000, two-year, 10% notes; 10% is a realistic rate for a note of this type.
> The SFP of Alice Inc. at December 31, 2019, includes the following: Transactions in 2020 include the following: 1. Accounts receivable of $146,000 was collected. 2. Customer accounts of $39,500 were written off during the year. 3. An additional $16,700
> The following information relates to Shea Inc.'s accounts receivable for the 2020 fiscal year: 1. An aging schedule of the accounts receivable as at December 31, 2020, is as follows: 2. The Accounts Receivable control account has a debit balance of $37
> Use the information presented for Volumetrics Corporation in BEll.19, but assume that the machinery is sold for $5,200 instead of $13,500. Prepare journal entries to (a) update depreciation for 2022 and (b) record the disposal.
> Gelato Corporation, a private entity reporting under ASPE, was incorporated on January 3, 2019. The corporation's financial statements for its first year of operations were not examined by a public accountant. You have been engaged to audit the financial
> Fortini Corporation had record sales in 2020. It began 2020 with an Accounts Receivable balance of $475,000 and an Allowance for Doubtful Accounts of $33,000. Fortini recognized credit sales during the year of $6,675,000 and made monthly adjusting entrie
> A series of unrelated situations follow for several companies that use ASPE: 1. Atlantic Inc.'s unadjusted trial balance at December 31, 2020, included the following accounts: 2. An analysis and aging of Central Corp.'s accounts receivable at December
> Information follows for Quartz Industries Ltd.: Additional information: 1. One June 26 transactions were for bank service charges. 2. One June 30 transactions was a bank debit memo for $1,050.00 for a customer's cheque returned and marked NSF (includ
> The cash account of Villa Corp. shows a ledger balance of $3,969.85 on June 30, 2020. The bank statement as at that date shows a balance of $4,150. When the statement was compared with the cash records, the following facts were determined: 1. There were
> Joseph Kiuvik is reviewing the cash accounting for Connolly Corporation, a local mailing service. Joseph's review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2020. Petty cash Joseph has collected the follo
> The Patchwork Corporation manufactures sweaters for sale to athletic-wear retailers. The following information was available on Patchwork for the years ended December 31, 2019 and 2020: During 2020, Patchwork had the following transactions: 1. On June
> The Cormier Corporation sells office equipment and supplies to many organizations in the city and surrounding area on contract terms of 2/10, n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 day
> In 2020, Ibran Corp. required additional cash for its business. Management decided to use accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following transactions: 1. On July 1, 2020, Ibra
> Logo Limited follows ASPE. It manufactures sweatshirts for sale to athletic-wear retailers. The following summary information was available for Logo for the year ended December 31, 2019: Part 1 During 2020, Logo had the following transactions: 1. Total
> Dev Equipment Corp. usually closes its books on December 31, but at the end of 2020 it held its cash book open so that a more favorable statement of financial position could be prepared for credit purposes. Cash receipts and disbursements for the first 1
> Volumetrics Corporation owns machinery that cost $20,000 when purchased on January 1, 2020. Depreciation has been recorded at a rate of $3,000 per year, resulting in a balance in accumulated depreciation of $6,000 at December 31, 2021. The machinery is s
> Essan Construction Inc., which has a calendar year end, has entered into a non-cancellable fixed price contract for $2.8 million beginning September 1, 2020, to build a road for a municipality. It has been estimated that the road construction will be com
> Hale Hardware takes pride in being the "shop around the corner" that can compete with the big box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Hale has developed the foll
> Tablet Tailors sells tablet PCs combined with Internet service (Tablet Bundle A) that permits the tablet to connect to the Internet anywhere (that is, set up a WiFi hot spot). The price for the tablet and a four-year Internet connection service contract
> Martz Inc. has a customer loyalty program that rewards a customer with one customer loyalty point for every $100 of purchases. Each point is redeemable for a $3 discount on any future purchases. On July 2, 2020, customers purchase products for $300,000 (
> Ritt Ranch & Farm is a distributor of ranch and farm equipment. Its products include small tools, power equipment for trench-digging and fencing, grain dryers, and barn winches. Most products are sold direct via its company Internet site. However, gi
> Presented below are three independent revenue arrangements for Colbert Company. The company follows IFRS. Instructions Respond to the requirements related to each revenue arrangement. a. Colbert sells 3-D printer systems. Recently, Colbert provided a sp
> Van Hatten Consolidated has three operating divisions: DeMent Publishing Division, Ankiel Security Division, and Depp Advisory Division. Each division maintains its own accounting system but follows IFRS. DeMent Publishing Division The DeMent Publishing
> Economy Appliance Co. manufactures low-price, no-frills appliances that are in great demand for rental units. Pricing and cost information on Economy's main products are as follows. Customers can contract a purchase either individually at the stated pr
> Assume the facts given in P6.9 for Essan Construction Inc. except assume that at December 31, 2021, Essan estimates the costs to complete the road contract at $1,050,000 instead of $600,000. Instructions a. Using the percentage-of-completion method, cal
> Respond to the requirements related to the following independent revenue arrangements for BBQ Master Products and services. Assume that BBQ Master follows IFRS. a. BBQ Master offers contract BM205, which consists of a free-standing gas barbecue for small
> Caley Inc. owns a building with a carrying amount of $1.5 million, as at January 1, 2020. On that date, Caley's management determined that the building's location is no longer suitable for the company's operations and decided to dispose of the building
> The statement of financial position of Manion Corporation follows (in thousands): Instructions Evaluate the statement of financial position. Briefly describe the proper treatment of any item that you find incorrect. Assume the company follows IFRS.
> The statement of financial position of Sargent Corporation follows for the current year, 2020: The following additional information is available: 1. The Current Assets section includes the following: cash $150,000; accounts receivable $170,000, less $10,
> Jia Inc. applies ASPE and had the following statement of financial position at the end of operations for 2019: During 2020, the following occurred: 1. Jia Inc. sold some of its trademarks. The trademarks had an unlimited useful life and a cost of $10,000
> Aero Inc. had the following statement of financial position at the end of operations for 2019: During 2020, the following occurred: 1. Aero liquidated its FV-NI investments portfolio at a loss of $5,000. 2. A parcel of land was purchased for $38,000. 3.
> In an examination of Garganta Limited as at December 31, 2020, you have learned about the following situations. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 2004. Deprecia
> Lydia Trottier has prepared baked goods for sale since 1998. She started a baking business in her home and has been operating in a rented building with a storefront since 2003. Trottier incorporated the business as MLT Inc. on January 1, 2020, with an in
> The statement of financial position of Delacosta Corporation as at December 31, 2020, is as follows: Note 1: Goodwill in the amount of $70,000 was recognized because the company believed that the carrying amount of assets was not an accurate representati
> The trial balance of Eastwood Inc. and other related information for the year 2020 follows: Additional information: 1. The inventory has a net realizable value of $212,000. The FIFO method of inventory valuation is used. 2. The FV-OCI investments' fair v
> Martineau Inc., a major retailer of high-end office furniture, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative statement of financial position and income statement
> L&G Inc., a retailer of garden tools that follows ASPE, had the following statements prepared as of December 31, 2020: Additional information: 1. Dividends on common shares in the amount of $12,000 were declared and paid during 2020. 2. Depreciation
> Compare the cost recovery impairment model used under ASPE with the rational entity model used under IFRS. Which model provides better information for financial statement users?
> A comparative statement of financial position for Spencer Corporation follows: Additional information: 1. Net income for the fiscal year ending December 31, 2020, was $19,000. 2. In March 2020, a plot of land was purchased for future construction of a pl
> Statement of financial position items for Montoya Inc. Follow for the current year, 2020: Instructions a. Prepare a classified statement of financial position in good form. The numbers of authorized shares are as follows: unlimited common and 20,000 pref
