Lamanna Laundry Ltd. is a full-service laundry provider, focusing on high-end clientele. Lamanna Laundry has recently invested in new technology to improve efficiency. In order to finance the new technology, the company issued a 10-year bond on January 1, 2017. On issuance, the bonds were assigned a BBB–credit rating by Standard & Poor’s, and the market rate for the bonds was 9%. During the year, competition heightened in the industry, and Lamanna Laundry experienced four consecutive quarters of increasing losses and deteriorating financial position in 2017. (a) Discuss the potential impact on the bonds’ credit rating, if any. (b) Discuss the potential impact on investors’ required yield on the bonds, if any.
> Ambrosia Limited has the following balances as at December 31, 2017: accounts payable and accrued liabilities $20,000, wages payable $15,000, severance payable (due September 30, 2019) $15,000, and bonds payable of $140,000 due September 30, 2020 (curren
> Davida Limited started operations in 2013. Although it has grown steadily, the company reported accumulated operating losses of $450,000 in its first four years in business. In the most recent year (2017), Davida appears to have turned the corner and rep
> Access the annual financial statements of Empire Company Limited for its year ended May 2, 2015 at www.sedar.com or the company’s website. Instructions: Review Empire Company Limited’s consolidated financial statements and provide answers to the followi
> Tsui Corporation went through a financial reorganization by writing down its buildings by $107,000 and eliminating its deficit, which was $182,000 before the reorganization. As part of the reorganization, the creditors agreed to take back 55% of the comm
> Use the information for Hanover Corporation in BE15-21. Assume now that the company resells the 1,000 treasury shares at $55 per share. Prepare the journal entries for the repurchase and subsequent sale of the treasury shares. Data from BE15-21: Hanove
> Hanover Corporation has 750,000 shares outstanding. The shares have an average cost of $45 per share. On September 5, 2017, the company repurchases 1,500 of its own shares at $75 per share and does not cancel them. The shares are classified as treasury s
> Sullivan Limited issued 2,000 shares of no par value common shares for $79,000. Prepare Sullivan’s journal entry if (a) the shares have no par value, and (b) the shares have a par value of $11 per share.
> List the types of dividends. Why do companies or investors have a preference for one or the other?
> Khalid Inc. has the following selected financial data: There were no preferred dividends in arrears. (a) Calculate the following ratios for 2017: (1) rate of return on common shareholders’ equity, (2) payout ratio, (3) price earnings
> The Sawgrass Corporation, a public company, reported the following balances at January 1, 2017: Common Shares (32,000 shares issued, unlimited authorized)…………………$ 800,000 Retained Earnings…………………………………………………………………………………1,500,000 Contributed Surplus……………
> Lu Corporation has the following account balances at December 31, 2017: Common Shares Subscribed………………………………………………..$ 250,000 Common Shares…………………………………………………………………….310,000 Subscriptions Receivable…………………………………………………………80,000 Retained Earnings………………………
> Use the information for Kindey Corporation from BE15-15. Assume instead that Kindey declared a 1-for-5 reverse stock split, and answer the same questions. Data from BE15-15: Kindey Corporation has 185,000 common shares outstanding with a carrying value
> Kindey Corporation has 185,000 common shares outstanding with a carrying value of $20 per share. Kindey declares a 4-for-1 stock split. (a) How many shares are outstanding after the split? (b) What is the carrying value per share after the split? (c) Wha
> The following facts apply to the pension plan of Yorke Inc. for the year 2017. Yorke applies ASPE. Plan assets, January 1, 2017……………………………………………………………….$490,000 Defined benefit obligation, funding basis, January 1, 2017………………………389,000 Defined benefit o
> Davis Inc. is a privately held company that uses ASPE. Davis had the following information available at March 31, 2017: Davis Inc.’s partial list of comparative account balances as at March 31, 2017 and 2016 is as follows: Additiona
> Access the audited annual financial statements of Goldcorp Inc. for its year ended December 31, 2014 from SEDAR (www.sedar.com) or the company’s website. Instructions: (a) Describe the business that Goldcorp Inc. operates in. (b) Identify the components
> Chadwick Corporation has 450,000 common shares outstanding. The corporation declares a 6% stock dividend when the common shares’ fair value is $30 per share. (Their carrying value is $18 per share.) Prepare the journal entries for the company for both th
> On April 20, Raule Mining Corp. declared a dividend of $400,000 that is payable on June 1. Of this amount, $150,000 is a return of capital. Raule had no contributed surplus on April 20. Prepare the April 20 and June 1 journal entries for Raule.
> Mallard Inc. owns shares of Oakwood Corporation that are classified as Mallard’s fair value through net income (FV-NI) investment portfolio and accounted for using the FV-NI model. At December 31, 2016, the securities were carried in Mallard’s accounting
> Martinez Ltd. has the following equity accounts at January 1, 2017. Preferred shares outstanding: 2,500 shares……………………………$ 62,500 Common shares outstanding: 4,000 shares…………………………….400,000 (a) What was the average issue price of the preferred shares? (
> Hamza Inc. declared a cash dividend of $0.60 per share on its 1.5 million outstanding shares. The dividend was declared on August 1 and is payable on September 9 to all shareholders of record on August 15. Prepare all necessary journal entries for those
> Explain the pros and cons of incorporating.
> Pflug Ltd. signed an instalment note on January 1, 2017 in settlement of an account payable of $40,000 owed to Mott Ltd. Pflug is able to borrow funds from its bank at 11%, whereas Mott can borrow at the rate of 10%. The note calls for two equal payments
> Big Country Corporation is in the business of selling cattle. Due to recent diseases plaguing cattle, Big Country is experiencing a cash shortage. Big Country issued a $280,000, six-year, zero-interest-bearing note to Little Town Corp. on January 1, 2017
> Brestovacki Corporation issued a $50,000, five-year, 5% note to Jernigan Corp. on January 1, 2017 and received a piece of equipment that normally sells for $38,912. The note requires annual interest payments each December 31. The market interest rate for
> Rosek Inc. provides the following information related to its post-retirement health care benefits for the year 2017: Defined post-retirement benefit obligation at January 1, 2017………………………………$110,000 Plan assets, January 1, 2017……………………………………………………………………
> Sophia Incorporated issued a $105,000, five-year, zero-interest-bearing note to Angelica Corp. on January 1, 2017 and received $52,000 cash. Sophia uses the effective interest method. (a) Using a financial calculator and computer spreadsheet functions, c
> Companies around the globe have moved to, or are in the process of moving to, IFRS. Evidence has shown that it is preferable to adopt IFRS in its entirety, with no deviations from the standards. This chapter shows how much the legal environment affects t
> On May 1, 2017, Jadeja Corporation, a publicly listed corporation, issued $200,000 of five-year, 8% bonds, with interest payable semi-annually on November 1 and May 1. The bonds were issued to yield a market interest rate of 6%. Jadeja uses the effective
> Samwall Ltd. needed funding to bridge the gap between paying its suppliers and collecting its receivables. As such, Samwall issued a $300,000, four-year, 8% note at face value to Easy Loan Bank on January 1, 2017 and received $300,000 cash. The note requ
> Buchanan Corporation issues $500,000 of 11% bonds that are due in 10 years and pay interest semi- annually. At the time of issue, the market rate for such bonds is 10%. Using time value of money tables, a financial calculator, and computer spreadsheet fu
> At December 31, 2017, Jelena Incorporated has a bond payable with a carrying value of $1,200,000 (based on amortized cost) due September 1, 2018 and a current value of $1,250,000. The interest payable as at December 31, 2017 is $25,000. Show how the abov
> On January 1, 2017, Steinem Corporation established a special purpose entity to buy $1 million of accounts receivable from Steinem. Investors have invested in the special purpose entity to benefit from the return on assets and certain tax advantages. The
> Lawrence Incorporated owes $100,000 to Ontario Bank Inc. on a two-year, 10% note due on December 31, 2017. The note was issued at par. Because Lawrence is in financial trouble, Ontario Bank agrees to extend the maturity date of the note to December 31, 2
> Assume that Theo Limited has a loan that is currently due at year end. The debt is being refinanced with a five-year loan and the deal to refinance the debt is signed two days after year end. How would the original loan be classified in the year-end stat
> Jensen & Jensen Incorporated, a telecommunications equipment manufacturer, has a debt to total assets ratio of 55%, while competing companies of similar size operating in the same industry have an average debt to total assets ratio of 62%. Jensen & Jense
> The following information is in regard to Saverio Corp.’s defined benefit pension plan. Defined benefit obligation, 1/1/17 (before amendment)………………………$239,000 Plan assets, 1/1/17……………………………………………………………………………….155,000 Discount rate……………………………………………………………
> On January 1, 2017, Jamil Incorporated redeemed bonds prior to their maturity date of January 1, 2018. The face value of the bonds was $800,000, and the redemption was performed at 97. As at the redemption date, the unamortized premium was $6,500. Prepar
> Hanson Incorporated issued $1 million of 7%, 10-year bonds on July 1, 2016 at face value. Interest is payable each December 31. The company has chosen to apply the fair value option in accounting for the bonds. A risk assessment at December 31, 2017 show
> BCE Inc., a well-known Canadian telecommunications and media company, has a December 31 year end. Access the company’s 2014 annual report from the company website or from www.sedar.com. Instructions: (a) What per share information has the company provid
> Travel In Style Limited issued $1,000,000 of 9% bonds on September 1, 2017 for $1,058,671. The term of the bonds is September 1, 2017 to September 1, 2025, with interest payable quarterly each December 1, March 1, June 1, and September 1. The company use
> Assume that the bonds in BE14-15 were issued for $644,632 and the effective interest rate was 6%. (a) Prepare the company’s journal entry for the January 1 issuance. (b) Prepare the company’s journal entry for the July 1 interest payment. (c) Prepare the
> On January 1, 2017, Quinton Corporation issued $600,000 of 7% bonds that are due in 10 years. The bonds were issued for $559,229 and pay interest each July 1 and January 1. The company uses the effective interest method. Assume an effective rate of 8%. (
> The City of Fram issued 100 bonds at their face value of $6,000 each plus accrued interest on June 1, 2017. The term of the bonds was January 1, 2017 to January 1, 2023, with interest payable semi-annually each January 1 and July 1 at 6%. Fram uses the e
> Assume that the bonds in BE14-11 were issued at 103. Assume also that Grenier Limited records the amortization using the straight-line method. Prepare the journal entries related to the bonds for (a) January 1, (b) July 1, and (c) December 31. Data from
> Assume that the bonds in BE14-11 were issued at 98. Assume also that Grenier Limited records the amortization using the straight-line method. Prepare the journal entries related to the bonds for (a) January 1, (b) July 1, and (c) December 31. Data from
> Grenier Limited issued $300,000 of 10% bonds on January 1, 2017. The bonds are due on January 1, 2022, with interest payable each July 1 and January 1. The bonds are issued at face value. Grenier uses the effective interest method. Prepare the company’s
> Griseta Limited sponsors a defined benefit pension plan for its employees, which it accounts for under ASPE. The following data relate to the operation of the plan for the year 2017: 1. The actuarial present value of future benefits earned by employees f
> Watson Corporation issued $500,000 of 8%, 10-year bonds on January 1, 2017 at face value. The bonds require annual interest payments each December 31. Costs associated with the bond issuance were $25,000. Watson follows ASPE and uses the straight-line me
> Refer to the information for DeGroot Limited in BE13-8. Assume that the amounts include tax. Prepare the entries for DeGroot. Round amounts to the nearest cent. Data from BE13-8: DeGroot Limited conducts all of its business in a province with HST of 13
> Refer to the financial statements of Brookfield Asset Management Inc. for its year ended December 31, 2014, which are reproduced at the end of Volume 2 of this text, and for its year ended December 31, 2013 found at www.sedar.com or on the company’s webs
> DeGroot Limited conducts all of its business in a province with HST of 13%. Prepare the summary journal entry to record DeGroot’s sales for the month of July, during which customers purchased $37,500 of goods on account and a journal entry for the cash p
> Cartwright Springs Brewery Ltd. (CSB) operates a microbrewery and sells beer directly to customers, bars, and restaurants. CSB uses one-liter blue glass refillable bottles featuring a swing-top ceramic lid. The bottles cost CSB $4.90 each. CSB charges cu
> Takemoto Inc. borrowed $60,000 on November 1, 2017 by signing a $61,350, three-month, zero-interest-bearing note. (a) Using a financial calculator or Excel, calculate the effective interest charged on the note. (b) Prepare Takemoto’s November 1, 2017 ent
> Refer to the information for Upland Limited in BE13-4. Assume that Upland uses reversing entries. Prepare the 2018 journal entry(ies) for Upland. Data from BE13-4: Upland Limited borrowed $40,000 on November 1, 2017 by signing a $40,000, three-month, 9
> Upland Limited borrowed $40,000 on November 1, 2017 by signing a $40,000, three-month, 9% note. Prepare Upland’s November 1, 2017 entry; the December 31, 2017 annual adjusting entry; and the February 1, 2018 entry.
> Jupiter Corp. provides at no extra charge a two-year warranty with one of its products, which was first sold in 2017. In that year, Jupiter sold products for $2.5 million and spent $68,000 servicing warranty claims. At year end, Jupiter estimates that an
> The following information is available for Antoine Corporation’s pension plan for the 2017 fiscal year: Defined benefit obligation, 1/1/17, accounting basis, before plan amendment………….$255,000 Fair value of plan assets, 1/1/17………………………………………………………………………
> Cozy Home Inc. offers its customers two furnace maintenance services. One service is for a one-time cleaning and servicing of a home furnace at a cost of $100. Customers can earn a 5% discount from this price if they pay before Cozy’s calendar fiscal yea
> Refer to the information for Lu Corp. in BE13-20 and BE13-21. Assume that the increase in the asset retirement obligation in 2017 related to the production of oil in 2017 was $61,942. Prepare any necessary entries to record the increase in the asset reti
> Refer to the information for Lu Corp. in BE13-20. Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at December 31, 2017, assuming that Lu follows (a) IFRS, and (b) ASPE. Ignore producti
> Lu Corp. erected and placed into service an offshore oil platform on January 1, 2017 at a cost of $10 million. Lu is legally required to dismantle and remove the platform at the end of its nine-year useful life. Lu estimates that it will cost $1 million
> IFRS allows per share amounts to be reported on items other than earnings. Instructions: (a) Adopt the role of the ethical accountant and write a short essay on the pros and cons of allowing companies to include alternate per share amounts in their annu
> Primeau Inc. pays its officers bonuses based on income. For 2017, the bonuses total $350,000 and are paid on February 15, 2018. Prepare Primeau’s December 31, 2017 adjusting entry and the February 15, 2018 entry. For the payment entry, ignore withholding
> Laurin Corporation offers parental benefits to its staff as a top-up on Employment Insurance benefits so that employees end up receiving 100% of their salary for 12 months of parental leave. Ruzbeh Awad, who earns $74,000 per year, announced that he will
> At December 31, 2017, 30 employees of Kasten Inc. have each earned one week of vacation time. The employees’ average salary is $1,000 per week. Prepare Kasten’s December 31, 2017 adjusting entry.
> Refer to the information for Whirled Inc. in BE13-15. Assume now that the employer is required to match every dollar of the CPP contributions of its employees and to contribute 1.4 times the EI withholdings. (a) Prepare the journal entry to record Whirle
> Whirled Inc.’s weekly payroll of $23,000 included employee income taxes withheld of $3,426, CPP withheld of $990, EI withheld of $420, and health insurance premiums withheld of $250. Prepare the journal entry to record Whirled’s weekly payroll.
> The following information is available for Huntley Corporation’s pension plan for the year 2017: Plan assets, January 1, 2017………………………………………………………………………$400,000 Actual return on plan assets……………………………………………………………………………17,000 Benefits paid to retirees………
> At December 31, 2017, Parew Corporation has a long-term debt of $700,000 owing to its bank. The existing debt agreement imposes several covenants related to Parew’s liquidity and solvency. At December 31, 2017, Parew was not in compliance with the covena
> Refer to the information about Clausius Ltd. in BE13-11. Assume instead that the tax return indicated 2017 income tax of $10,200. (a) Prepare the adjusting year-end entry to recognize the 2017 income tax. (b) Identify any yearend statement of financial p
> Clausius Ltd. made four quarterly payments of $3,200 each to the CRA during 2017 as instalment payments on its estimated 2017 corporate tax liability. At year end, Clausius’s controller completed the company’s 2017 tax return, which showed income tax of
> Louise Inc. operates in Alberta, where it is subject to GST of 5%. In August, Louise purchased $29,400 of merchandise inventory, and had sales of $45,000 on account. Louise uses a periodic inventory system. Prepare (a) the summary entry to record the pur
> Wellson Ltd. has current assets, including cash, accounts receivable, and inventory, and current liabilities, including accounts payable and short-term notes payable. Wellson manages its working capital by focusing on management of current assets. Wellso
> Molson Coors Brewing Company has a December 31 year end. Access the company’s 2014 annual report from the company website (www.molsoncoors.com). Instructions: (a) What types of earnings per share information does the company provide? (b) Does the compa
> Access IAS 34 (Interim Financial Reporting), and the interim financial report for the six-month period ended June 30, 2015, for Nestlé SA from the company’s website (www.nestle.com). Instructions: (a) Identify what specific financial statements and the
> Yuen Corporation shows the following financial position and results for the three years ended December 31, 2017, 2018, and 2019 (in thousands): For each year, calculate the current ratio, quick ratio, and days payables outstanding ratio, and comment on
> Siddle Corp. was recently sued by a competitor for patent infringement. Lawyers have determined that it is probable (and very likely) that Siddle will lose the case, and that Siddle will have to pay between $100,000 and $250,000 in damages. Siddle follow
> At December 31, 2017, Lawton & Border Inc. (L&B) is involved in a lawsuit. Under existing standards in IAS 37, (a) prepare the December 31 entry assuming it is probable (and very likely) that L&B will be liable for $700,000 as a result of this suit. (b)
> Kea Limited provides a defined contribution pension plan for its employees. The plan requires the company to deduct 5% of each employee’s gross pay for each payroll period as the employee contribution. The company then contributes 7% of the gross pay for
> Wynn Corp. offers a set of building blocks to customers who send in three codes from Wynn cereal, along with $1. Wynn purchased 100,000 building block sets in 2017 for $2.50 each, and paid for them by cash. During 2017, Wynn sold one million boxes of cer
> In July 10, 2017, Nguyen Ltd. sold $1.7 million worth of compressors to retailers on account. Nguyen had paid $960,000 for these compressors. Nguyen grants the right to return compressors that do not sell in three months following delivery. Past experien
> Discuss whether and how financial instruments are disclosed under IFRS, and the reason for the disclosure requirement.
> Explain how options pricing models are useful in determining fair value. What are the inputs to such models?
> Penner Corp. is preparing the management discussion and analysis portion of the annual report to shareholders. It wishes to provide a visual depiction of the proportion of the total revenue each segment uses. Using Excel, graph the seven industry segment
> Yuen Corporation shows the following financial position and results for the three years ended December 31, 2017, 2018, and 2019 (in thousands): For each year, calculate the current ratio, quick ratio, and days payables outstanding ratio, and comment on
> Referring to the research study mentioned in this chapter (in the section “Limitations of Financial Statement Analysis”), discuss some limitations of the financial statement analysis done in BE23-21. Include in your an
> formerly British Sky Broadcasting Group plc, is a pan-European pay television giant and multimedia content company whose common shares trade on the London Stock Exchange. The company produces financial statements in accordance with IFRS. Access the compa
> Condensed data from the comparative statement of financial position (SFP) of Legros Inc. follow: (a) Using vertical (common-size) analysis, calculate the various SFP categories as a percentage of total assets for Legros Inc. for each of 2015, 2016, and
> The income statements of Dwayne Corporation show the following amounts: Using vertical (common-size) analysis, analyze Dwayne Corporation’s declining profit before tax. 2017 2016 2015 $800 $770 530 $720 468 Net sales Cost of goods
> Refer to E18-7 for Sayaka Tar and Gravel Ltd., and assume the same facts as in E18-8 for the fiscal year ended December 31, 2018, except that the enacted tax rate for 2019 and subsequent years was reduced to 20% on September 15, 2018. Instructions: (a)
> What is the difference between an auditor’s unmodified opinion and a qualified opinion?
> Nortel Networks experienced one of the most notorious Canadian bankruptcies. Nortel’s financial statements contained misrepresentations resulting in top executives meeting bonus targets. Eventually there was a distribution of funds obtained from selling
> Indicate in general journal form how the following items would be entered in a work sheet to prepare the statement of cash flows where payments for dividends are classified as financing activities. Indicate within the journal entries any items that impac
> Tonoma Inc., a company that follows IFRS, is preparing its December 31, 2017 financial statements. The following two events occurred after December 31, 2017: (1) A flood loss of $80,000 occurred on March 1, 2018. (2) A liability, estimated at $140,000 at
> The following information was described in a note of Cruton Packing Co., a public company that follows IFRS: “During August, Bigelow Products Corporation purchased 212,450 shares of the Company’s common shares, which constitutes approximately 35% of the
> How would the transaction in BE23-13 be recorded if the individual shareholder owned only 40% of the shares of each company? Assume that there is independent evidence to support the value of the robotic equipment. Discuss and prepare journal entries. Use
> Papadopoulos Limited (PL) sells retail merchandise in Canada. The company was incorporated last year and is now in its second year of operations. PL is owned and operated by the Papadopoulos family, and Iris Papadopoulos, the company president, has decid
> Crown Inc. (CI) is a private company that manufactures a special type of cap that fits on a bottle. At present, it is the only manufacturer of this cap and therefore enjoys market security. The machinery that makes the cap has been in use for 20 years an
> Locate and review Brookfield Asset Management’s statement of changes in shareholders’ equity in its financial statements for the fiscal years ended December 31, 2014 and 2013, at the end of Volume 2 of this text. Instructions: (a) Identify the sharehold
