During 2020, Saskatchewan Enterprises Ltd., a private entity, incurred$4.7 million in costs to develop a new software product called Dover. Of this amount, $1.8 million was spent before the company determined that the product was technologically and financially feasible. Dover was completed by December 31, 2020, and will be marketed to third parties. Saskatchewan expects a useful life of eight years for this product, with total revenues of $12 million. During 2021, Saskatchewan realized revenues of $2.7 million from sales of Dover. Instructions a. Assuming Saskatchewan reports under ASPE, prepare the journal entries that are required in 2020 to record the above. b. Prepare the entry to record amortization at December 31, 2021, assuming a straight-line method of amortization. c. At what amount should the software costs be reported in the December 31, 2021, statement of financial position? d. Could the net realizable value of this asset at December 31, 2021, affect your answer? Explain how limited-life assets are tested for impairment. e. How would your response to part (d) change if Saskatchewan Enterprises Ltd. were a public company?
> On November l, 2019, Campbell Corporation management decided to discontinue operation of its Racketeer Division and approved a formal plan to dispose of the division. Campbell is a successful corporation with earnings of $150 million or more before tax f
> Dr. Emma Armstrong, M.D., maintains the accounting records of the Blood Sugar Clinic on a cash basis. During 2020, Dr. Armstrong collected $146,000 in revenues and paid $55,470 in expenses. At January 1, 2020, and December 31, 2020, she had accounts rece
> On January 1, 2020, Caroline Lampron and Jenni Meno formed a computer sales and service enterprise in Montreal by investing $90,000 cash. The new company, Razorback Sales and Service, had the following transactions in January: 1. Paid $6,000 in advance f
> Greentree Properties Ltd. is a publicly listed company following IFRS. Assume that on December 31, 2020, the carrying amount of land on the statement of financial position (SFP) is $500,000. Management determines that the land's value in use is $425,000
> The equity accounts of Good Karma Corp. as at January 1, 2020, were as follows: During 2020, the following transactions took place: Instructions Prepare a statement of changes in equity for the year ended December 31, 2020. The company follows IFRS. Ass
> Amos Corporation was incorporated and began business on January 1, 2020. It has been successful and now requires a bank loan for additional capital to finance an expansion. The bank has requested an audited income statement for the year 2020 using IFRS.
> Faldo Corp. is a public company and has 100,000 common shares outstanding. In 2020, the company reported income from continuing operations before income tax of $2,710,000. Additional transactions not considered in the $2,710,000 are as follows: 1. In 202
> In recent years, Grace Inc. has reported steadily increasing income. The company reported income of $20,000 in 2017, $25,000 in 2018, and $30,000 in 2019. Several market analysts have recommended that investors buy Grace Inc. shares because they expect t
> Zephyr Corporation began operations on January 1, 2017. Recently the corporation has had several unusual accounting problems related to the presentation of its income statement for financial reporting purposes. The company follows ASPE. You are the CPA f
> A combined statement of income and retained earnings for DC 5 Ltd. for the year ended December 31, 2020, follows. (As a private company, DC 5 has elected to follow ASPE.) Also presented are three unrelated situations involving accounting changes and the
> Using Excel functions, calculate the present value of the net cash flows required of Dunn Inc. for (1) The purchase alternative and (2) The lease alternative. Hint: For the annuity due for the lease payments, use type 1. b. Which of the two alternatives
> Using a financial calculator, calculate the present value of the net cash flows required of Dunn Inc. for: 1. The purchase alternative and 2. The lease alternative. Hint: For the annuity due for the lease payments, program your calculator to annuity due
> M&B Tooling Ltd. is assessing two available options for the purchase of new equipment with a negotiated cash price of $100,000. The manufacturer is willing to accept a down payment of 20% of the purchase price and an instalment note for the balance. The
> EMI Inc. is a public company that operates numerous movie theatres in Canada. Historically, it operated as a trust and its business model consisted of distributing all of its earnings to shareholders through dividends. As a result of tax changes two year
> Hambrecht Corp. is preparing its financial statements for the fiscal year ending November 30, 2020. Certain specialized equipment was scrapped on January 1, 2021. At November 30, 2020, this equipment was being used in production by Hambrecht and had a ca
> Grappa Grapes Inc. (GGI) grows grapes and produces sparkling wines. The company is located in a very old area of town with easy access to fertile farmland that is excellent for growing grapes. It is owned by the Grappa family. The company has been in ope
> Snow Spray Corp. (SSC) recently filed for bankruptcy protection. The company manufactures downhill skis and reports under ASPE. With the increased popularity of such alternative winter sports as snowboarding and tubing, sales of skis are sagging. The com
> Iskra Vremec and Colin McFee are experienced scuba divers who have spent many years in the salvage business. About a year ago, they decided to start their own company to recover damaged and sunken vessels and their cargoes off the east coast of Canada. T
> ASPE and IFRS have differing criteria for whether an element should be recognized or not. Assume that Thatcher Inc. (TI) is the subject of a lawsuit. TI sells prepared food on a wholesale basis to supermarket chains (which resell the food at a retail lev
> The ASPE conceptual framework acknowledges the concept of conservatism. Instructions a. Define the term "conservatism." b. IFRS introduced the term "prudence" in the new Conceptual Framework. Explain what this means. c. Is conservatism and/or prudence i
> Jasper Bakery Limited signed a purchase order to buy 50 kg of butter from a farmer over the next month at a fixed price. The butter is of exceptional quality and will be used in baked goods that will be sold in the bakery. Instructions a. Define the ter
> On December 31, 2019, Zurich Corp. provided you with the following pre-adjustment information regarding its portfolio of investments held for short-term profit-taking: During 2020, the Bilby Corp. shares were sold for $9,500. The fair values of the secur
> Refer to the information in E9.3, except assume that Mustafa hopes to make a gain on the bonds as interest rates are expected to fall. Mustafa accounts for the bonds at fair value with changes in value taken to net income, and separately recognizes and r
> On January 1, 2020, Phantom Corp. acquires $300,000 of Spider Products Inc. 9% bonds at a price of $278,384. The interest is payable each December 31, and the bonds mature on December 31, 2022. The investment will provide Phantom Corp. with a 12% yield.
> On January 1, 2020, Mustafa Limited paid $537,907.40 for 12% bonds with a maturity value of $500,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2020, and mature on January 1, 2025, with interest receivable on December
> Chuckwalla Limited purchased a computer for $7,000 on January l, 2020. Straight-line depreciation is used for the computer, based on a five-year life and a $1,000 residual value. In 2022, the estimates are revised. Chuckwalla now expects the computer wil
> (Entries for Cost/ Amortized Cost Investments) On January 1, 2020, Kenn Corp. purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2020, and mature on January 1, 2025, with interest receivable on December 31 of each y
> Each of the following investments is independent of the others. 1. A bond that will mature in four years was bought one month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold. 2. Ten percent of the
> Tennessee Corp., reporting under ASPE, has provided the following information regarding its intangible assets: 1. A patent was purchased from Marvin Inc. for $1.2 million on January 1, 2019. Tennessee estimated the patent's remaining useful life to be 1
> In 2020, Inventors Corp. spent $392,000 on a research project, but by the end of 2020 it was impossible to determine whether any benefit would come from it. Inventors prepares financial statements in accordance with IFRS. Instructions a. What account
> Oakville Corp. incurred the following costs during 2020 in connection with its research and development phase activities: Instructions a. Calculate the amount to be reported as research and development expense by Oakville on its income statement for 20
> In early January 2020, FJS Corporation applied for and received approval for a trade name, incurring legal costs of $52,500. In early January 2021, FJS incurred $28,200 in legal fees in a successful defense of its trade name. Instructions a. Management
> Institute Limited organized late in 2019 and set up a single account for all intangible assets. The following summary shows the entries in 2020 (all debits) that have been recorded in Intangible Assets since then: Instructions a. Prepare the necessary
> As the recently appointed auditor for Daleara Corporation, you have been asked to examine selected accounts before the six-month financial statements of June 30, 2020, are prepared. The controller for Daleara Corporation mentions that only one account is
> Selected information follows for Mount Olympus Corporation for three independent situations: 1. Mount Olympus purchased a patent from Bakhshi Co. for $1.8 million on January 1, 2018. The patent expires on January l, 2028, and Mount Olympus is amortizing
> Net income figures for Belgian Ltd. are as follows: Future income is expected to continue at the average amount of the past five years. The company's identifiable net assets are appraised at $460,000 on December 31, 2020. The business is to be acquired b
> Wildcat Mining Limited is nearing the end of the useful life of its only remaining natural resource that it is mining in northern Quebec. The balance of its Common Shares account is $2,500,000, Retained Earnings is $3,850,000, and Accumulated Depletion i
> Rotterdam Corporation's pretax accounting income of $725,000 for the year 2020 includedthe following items: Ewing Industries Ltd. would like to purchase Rotterdam Corporation. In trying to measure Rotterdam's normalized earnings for 2020, Ewing determine
> The following is net asset information for the Dhillon Division of Klaus Inc.: The purpose of the Dhillon Division (also identified as a reporting unit or cash-generating unit) is to develop a nuclear-powered aircraft. If successful, travelling delays t
> Berrie Electric Inc. has the following amounts included in its general ledger at December 31, 2020: Instructions a. Based on the information provided, calculate the total amount for Berrie to report as intangible assets on its statement of financial p
> On July 1, 2020, Zoe Corporation purchased the net assets of Soorya Company by paying $415,000 cash and issuing a $50,000 note payable to Soorya Company. At July 1, 2020, the statement of financial position of Soorya Company was as follows: The recorded
> Fred Moss, owner of Medici Interiors Inc., is negotiating for the purchase of Athenian Galleries Ltd. The condensed statement of financial position of Athenian follows in an abbreviated form: Medici and Athenian agree that the land is undervalued by $40,
> Refer to the information provided in El2.l 7, but now assume that Lighting Designs Corp. is a publicly accountable company. At December 31, 2020, the copyright's value in use is $1,850,000 and its selling costs are $100,000. Instructions a. Prepare th
> The following information is for a copyright owned by Lighting Designs Corp., a private entity, at December 31, 2020. Lighting Designs Corp. applies ASPE. Assume that Lighting Designs Corp. will continue to use this copyright in the future. As at Decem
> Repeat El2.13, but now assume that the licence was granted in perpetuity and has an indefinite life, and that Dayton prepares financial statements in accordance with ASPE. At the end of 2020, Dayton Corporation owns a licence with a remaining life of 10
> Repeat El2.13, but now assume that the licence was granted in perpetuity and has an indefinite life. In El2.13 At the end of 2020, Dayton Corporation owns a licence with a remaining life of 10 years and a carrying amount of $530,000. Dayton expects undis
> Repeat El2.13, but now assume that Dayton prepares financial statements in accordance with ASPE, and that the recoverable amount under ASPE (undiscounted future cash flows) is calculated to be $500,000 at the end of 2021. In El2.13 At the end of 2020, D
> Andeo Corporation purchased a truck at the beginning of 2020 for $48,000. The truck is estimated to have a residual value of $3,000 and a useful life of 275,000 km. It wasdriven for 52,000 km in 2020 and 65,000 km in 2021. (a) Calculate depreciation expe
> Blue and White Town Taxi Incorporated applied for several taxi licences for its taxicab operations in the Town of Somerville and, on August 31, 2020, incurred costs of $12,500 in the application process. The outcome of applying for taxi licences in theto
> Selected account information follows for Entertainment Inc. as at December 31, 2020. All the accounts have debit balances. Assume the company uses IFRS when preparing financial statement Instructions a. Identify which items should be classified as inta
> In early January 2020, Chi Inc., a private enterprise that applies ASPE, purchased 40% of the common shares of Washi Corp. for $410,000. Chi was now able to exercise considerable influence in decisions made by Washi's management. Washi Corp.'s statement
> On January 3, 2020, Mego Limited purchased 3,000 (30%) of the common shares of Sonja Corp. for $438,000. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition: During 2020, Sonja reported
> The following are two independent situations. Situation 1: Lauren Inc. received dividends from its common share investments during the year ended December 31, 2020, as follows: • A cash dividend of $12,250 is received from Peel Corporation. Lauren owns a
> On January l, 2020, Rae Corporation purchased 30% of the common shares of Martz Limited for $196,000. Martz Limited shares are not traded in an active market. The carrying amount of Martz's net assets was $520,000 on that date. Any excess of the purchase
> Harnish Inc. acquired 25% of the outstanding common shares of Gregson Inc. on December 31, 2019. The purchase price was $1,250,000 for 62,500 shares, and is equal to 25% of Gregson's carrying amount. Gregson declared and paid a $0.75 per share cash divid
> Holmes Inc. purchased 30% of Nadal Corporation's 30,000 outstanding common shares at a cost of $15 per share on January 3, 2020. The purchase price of $15 per share was based solely on the book value of Nadal's net assets. On September 21, Nadal declared
> Weekly Corp., a December 31 year-end company that applies IFRS, acquired an investment of 1,000 shares of Credence Corp. in mid-2016 for $29,850. Between significant volatility in the markets and in the business prospects of Credence Corp., the accountin
> Sierra Corporation had sales revenue of $5,850,000 and investment revenue of $227,000 for the year ended December 31, 2020. Other items pertaining to 2020 were as follows: Sierra has 100,000 common shares outstanding throughout the year. Prepare a single
> On January l, 2018, Mamood Ltd. paid $322,744.44 for 12% bonds of Variation Ltd. with a maturity value of $300,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2018, mature on January l , 2023, and pay interest each Dece
> Tsui Corporation owns corporate bonds at December 31, 2020, accounted for using the amortized cost model. These bonds have a par value of $800,000 and an amortized cost of $788,000. After an impairment review was triggered, Tsui determined that the disco
> In early 2020, for the first time, HTSM Corp. invested in the common shares of another Canadian company. It acquired 5,000 shares of Toronto Stock Exchange-traded Bayscape Ltd. at a cost of $68,750. Bayscape is projected to reach a value of $15.50 per sh
> Niger Corp. gave you the following information about its investment in Fahad Corp. shares purchased in May 2020 and accounted for using the FV-OCI method: Instructions a. Prepare the adjusting journal entries needed on December 31, 2020, 2021, and 2022.
> At the end of 2020, Dayton Corporation owns a licence with a remaining life of 10 years and a carrying amount of $530,000. Dayton expects undiscounted future cash flows from this licence to total $535,000. The licence's fair value is $425,000 and disposa
> Assume the same information as in E9.14 and also assume that the bond is the only investment held by Miron Aggregates Ltd. Instructions a. Prepare a partial comparative statement of financial position at December 31, 2020 and 2021, showing only the rela
> On July 1, 2020, Miron Aggregates Ltd. Purchased 6% bonds having a maturity value of $100,000 for $103,585. The bonds provide the bondholders with a 5% yield. The bonds mature four years later, on July 1, 2024, with interest receivable June 30 and Decemb
> Assume the same information as in E9.12, except that the bonds are carried at FV-OCI. The fair value of the bonds at December 31 of each year end is as follows: 2019……………..$320,500……………….2020…………………$309,000 Instructions a. Prepare the journal entries to
> Activet Corporation, a Canadian-based international company that follows IFRS, has the following securities in its portfolio of investments acquired for trading purposes and accounted for using the FV-NI method on December 31, 2019: In 2020, Activet comp
> NB Corp. purchased a $100,000 face-value bond of Myers Corp. on August 31, 2019, for $104,490 plus accrued interest. The bond pays interest annually each November 1 at a rate of 93. On November 1, 2019, NB Corp. received the annual interest. On December
> Mega Inc.'s manufacturing division lost $100,000 (net of tax) for the year ended December 31, 2020, and Mega estimates that it can sell the division at a loss of $200,000 (net of tax). The division qualifies for treatment as a discontinued operation. (a)
> Zang Services Inc. accounts for the lease of a truck. The lease includes a residual value guarantee at the end of the lease term of $16,000. Zang estimates that the likelihood that the residual value will be $16,000 has a 50% certainty. Zang feels that t
> Videohound Video Company, a sole proprietorship, had the following information for 2020: Instructions Calculate the net income for 2020.
> Your client, Danyleyko Leasing Company, is preparing a contract to lease a machine to Souvenirs Corporation for a period of 25 years. Danyleyko has an investment cost of $365,755 in the machine, which has a useful life of 25 years and no salvage value at
> Viavelo Inc. manufactures cycling equipment. Recently, the company's vice-president of operations has requested construction of a new plant to meet the increasing demand for the company's bikes. After a careful evaluation of the request, the board of dir
> LEW Company purchased a machine at a price of $100,000 by signing a note payable, which requires a single payment of $123,210 in two years. a. Assuming annual compounding of interest, what rate of interest is being paid on the loan? Use either a financia
> HQ Ltd. purchased a used truck from Trans Auto Sales Inc. HQ paid a $4,000 down payment and signed a note that calls for 36 payments of $1,033.34 at the end of each month. The stated rate of interest in the note is 4%. As an incentive for entering into t
> Nevine Corporation owns and manages a small 10-store shopping centre, which it classifies as an investment property. Nevine has a May 31 year end and initially recognized the property at its acquisition cost of $10.8 million on June 2, 2019. The acquisit
> Plaza Holdings Inc., a publicly listed company in Canada, ventured into construction of a mega shopping mall in Edmonton, which is rated as the largest shopping mall in North America. The company's board of directors, after much market research, decided
> On March 1 2020, Russell Winery Ltd. purchased a five-hectare commercial vineyard for $1,050,000. The total purchase price was based on appraised market values of the building, grapevines, and equipment ($580,000, $260,000, and $210,000, respectively). R
> Light stone Equipment Ltd. wanted to expand into New Brunswick and was impressed by the provincial government's grant program for new industry. Once it was sure that it would qualify for the grant program, it purchased property in downtown Saint John on
> Jamil Jonas is an accountant in public practice as a sole proprietor. Not long ago, Jamil struck a deal with his neighbor Ralph to prepare Ralph's business income tax and GST returns for 2020 in exchange for Ralph's services as a landscaper. Ralph provid
> Delray Inc. follows IFRS and has the following amounts for the year ended December 31, 2020: gain on disposal of FV-NI investments (before tax), $15,000; loss from operation of discontinued division (net of tax), $42,000; income from operations (before t
> Cannon Ltd. purchased an electric wax melter on April 30, 2020, by trading in its old gas model and paying the balance in cash. The following data relate to the purchase: Instructions Assuming that Cannon's fiscal year ends on December 31 and depreciat
> On September 1, 2020, Rupert Ltd. Purchased equipment for $30,000 by signing a two-year note payable with a face value of $30,000 due on September 1, 2022. The going rate of interest for this level of risk was 8%. The company has a December 31 year end.
> Native Inc. decided to purchase equipment from Central Ontario Industries on January 2, 2020, to expand its production capacity to meet customers' demand for its product. Native issued a $900,000, five-year, non-interest bearing note to Central Ontario f
> In early February 2020, Huey Corp. began construction of an addition to its head office building that is expected to take 18 months to complete. The following 2020 expenditures relate to the addition: On February 1, Huey issued a $100,000, three-year not
> The following three situations involve the capitalization of borrowing costs for public companies following IFRS. Situation 1 On January 1, 2020, Oksana Inc. signed a fixed-price contract to have Builder Associates construct a major head office facility
> On December 31, 2020, Omega Inc., a public company, borrowed $3 million at 12% payable annually to finance the construction of a new building. In 2021, the company made the following expenditures related to this building structure (unless otherwise noted
> The following transactions occurred during 2020. Assume that depreciation of 10% per year is charged on all machinery and 5% per year on buildings, on a straight-line basis, with no estimated residual value. Assume also that depreciation is charged for a
> On January 1, 2020, the accounting records of Sasseville Ltee included a debit balance of $15 million in the building account and of $12 million in the related accumulated depreciation account. The building was purchased in January 1980 for $15 million,
> On January l, 2020, Algo Ltd. acquires a building at a cost of $230,000. The building is expected to have a 20-year life and no residual value. The asset is accounted for under the revaluation model, using the asset adjustment method. Revaluations are ca
> A partial statement of financial position of Blue water Ltd. on December 31, 2019, showed the following property, plant, and equipment assets accounted for under the cost model (accumulated depreciation includes depreciation for 2019): Blue water uses
> On January l , 2020, Twist Corp. had cash and common shares of $60,000. At that date, the company had no other asset, liability, or shareholders' equity balances. On January 2, 2020, Twist paid $40,000 cash for equity securities that it designated as fai
> Wen Corp., a public company located in Manitoba, both purchases and constructs various pieces of machinery and equipment that it uses in its operations. The following items are for machinery that was purchased and a piece of equipment that was constructe
> In fiscal 2020, Ivanjoh Realty Corporation purchased unimproved land for $55,000. The land was improved and subdivided into building Jots at an additional cost of $34,460. These building lots were all the same size but, because of differences in location
> Iqbal Corporation uses the lower of FIFO cost and net realizable value method on an individual item basis, applying the direct method. The inventory at December 31, 2019, included product AG. Relevant per-unit data for product AG follow: There were 1,0
> The net income per books of Russell Industries Limited was determined without any knowledge of the following errors. The 2015 year was Russell's first year in business. No dividends have been declared or paid. Instructions a. Prepare a work sheet to sh
> Eureka Limited has a calendar-year accounting period. The following errors were discovered in 2020. 1. The December 31, 2018 merchandise inventory had been understated by $51,000. 2. Merchandise purchased on account in 2019 was recorded on the books for
> At December 31, 2020, Igor Ltd. has outstanding non cancellable purchase commitments for 32,500 liters of raw material at $2.00 per liter. The material will be used in Igor's manufacturing process, and the company prices its raw materials inventory at co
> During 2020, Buildit Furniture Limited purchased a railway carload of wicker chairs. The manufacturer of the chairs sold them to Buildit for a lump sum of $59,850, because it was discontinuing manufacturing operations and wanted to dispose of its entire
> In an annual audit of Solaro Company Limited, you find that a physical inventory count on December 31, 2020, showed merchandise of $441,000. You also discover that the following items were excluded from the $441,000: 1. Merchandise of $61,000 is held by
