On 1 July 20X2, King Ltd. purchased $500,000 bonds of Princess Inc. at par. The bonds pay 6% interest annually on June 30. The bonds mature on 30 June 20X9. King has a June 30 year-end. At 30 June 20X3, King assessed that the credit risk of the Princess bonds had significantly increased and that the expected credit losses were estimated to be $22,000. Required: 1. Prepare journal entries for fiscal 20X3 related to these bonds. 2. At 30 June 20X4, King assessed that the Princess bonds were now credit-impaired due to an adverse change in technology within Princess’s industry. The present value of the estimated future cash flows was $425,000. Prepare the journal entries for 20X4. 3. Given the facts in requirement 2, prepare the journal entry to recognize interest revenue for 20X5.
> In each of the following situations, identify the element or elements, if any, that would appear in financial statements. If no element is recognized, give the reason. 1. Unpaid gas bill. 2. A patent on a new invention for which the market is unknown. 3.
> For each of the following transactions, indicate the point at which (1) the initial transaction is recognized and (2) the financial statement element is realized: 1. Inventory is purchased on credit on 1 August and is received on 14 August. It is paid fo
> The following list of statements poses conceptual issues: 1. The business entity is considered separate and apart from its owners for accounting purposes. 2. A transaction is always recorded in such a way as to reflect its legal form. 3. It is permissibl
> Indicate whether the following statements are true or false. For a false statement, write “false,” and briefly indicate why the statement is false. 1. Full disclosure involves telling financial statement users everything about the company’s transactions.
> For each of the following situations, indicate whether you agree or disagree with the practice described, list one accounting concept/assumption/qualitative criteria/measurement method that is related to the situation (either followed or violated), and i
> Accounting measurements are enhanced by the presence of the qualities of relevance (predictive and confirmatory value), comparability, verifiability, timeliness, and faithful representation. For each of the following, indicate the quality demonstrated: 1
> Xuan Corp., a private company, is assessing several transactions that occurred during the 20X3 financial year and is deciding how these items should be recorded. Management understands that judgement is required as well as the application of various key
> The independent auditor of Fluidity Inc. found the following situations: 1. The company uses the straight-line method of measuring depreciation on manufacturing machinery, even though it knows that a method based on actual usage would provide better matc
> Indicate if each of the following items would be recognized in TelCan Ltd.’s financial statements for 20X3 and, if so, what elements would be recognized. For any items that would not be recognized, explain the reason for nonrecognition. 1. TelCan issued
> Which of the following events would normally cause revenue recognition, assuming use of accrual accounting and transfer of title on delivery? 1. Collection of cash from a customer 30 days after the product is delivered. 2. Collection of cash from a custo
> Identify the level in the hierarchy that would be most appropriate for measuring the following items using the fair-value hierarchy: Required: Identify the most appropriate value of the hierarchy to measure each item.
> In each of the following cases, indicate the principle(s) that appears to have been violated: Case A: For its factory equipment, Unrequited Love Inc. used accelerated depreciation in 20X2; straight-line in 20X3; and accelerated in 20X4. Case B: Aaronist
> Tannino Ltd. is a private investment company that manages investments for a group of about 30 wealthy individuals. The company is owned and managed by two experienced investment managers, each of whom owns 50% of the shares. The company merges all of its
> Review each of the independent scenarios provided. For each one, state which stage of the accounting policy choice process the scenario would likely occur at. 1. Management acknowledges there is no active market for an asset it is considering purchasing.
> Johnny Rose is an accounting student learning about ASPE and IFRS. Johnny has heard that ASPE’s conceptual framework provides less detail and has a different focus. You, Wan Wu, have recently graduated from a four-year accounting program and feel you hav
> The financial statements of Raychem Corporation included the following note: During the current year, plant assets were written down by $8,000,000. This writedown will reduce future expenses. Depreciation and other expenses in future years will be lower,
> For each of the following independent transactions, apply the concepts of recognition and realization and state at what point each occurs. 1. Company Y issued 10,000 shares at $10,000 dollars for cash. 2. ABC Company estimates that it will incur $45,000
> For each of the following transactions, indicate the point at which (1) the initial transaction is recognized and (2) the financial statement element is realized: 1. A customer pays $3,000 relating to a deposit for work to be completed in the following f
> The value of Coca-Cola’s trademark has been estimated as billions of dollars. Yet, even though Coca-Cola reports over $12 billion of goodwill and other intangible assets, none of this reported value relates to the Coca-Cola trademark, which is unrecogniz
> In ASPE if a contingent loss (lawsuit) is reasonably measurable and likely to be incurred, the amount is accrued in the financial statements. If the amount is not measurable or is not likely to be incurred, then the potential loss is disclosed but not re
> The bookkeeper for Branford Ltd. has drawn up a financial statement on 31 December 20X1. Some of the items on the draft balance sheet are as follows: Cash $400,000 Consists of 300,000 Canadian dollars in the bank, plus 100,000 Hong Kong dollars held in
> Which measurement method would be most appropriate for the following items: historical cost or current value? For current value, specify which of the three measurement bases applies. 1. Inventory 2. Derivative 3. Building 4. Bond 5. Note receivable (2 ye
> Carleton Builders Ltd. recorded the following summarized transactions during the current year: 1. The company originally sold and issued 100,000 common shares. During the current year 6,000 shares were repurchased from the shareholders and retired. Near
> An examiner’s close inspection of the annual financial statements and the accounting records revealed that Mawani Inc. may have violated some accounting principles. The examiner questioned the following transactions: 1. Merchandise purchased for resale w
> Marianne Corp. has hired you on a contract basis to review its accounting decisions which were made during the current year ended 31 December 20X1. Marianne Corp. uses IFRS for financial reporting. Required: Review the following items and explain whether
> Marcon Properties Ltd. is a diversified private company that owns approximately 60 retail properties that the company has operated as discount department stores. These stores are small, stand-alone properties that Marcon owns outright, although most prop
> Entities may have a variety of corporate reporting objectives specific to their circumstances, such as: 1. Assessing and predicting cash flows 2. Minimizing current income taxes 3. Complying with restrictive covenants (specifically, debt covenants that s
> You have been hired as the assistant in the finance department of a medium-sized publicly traded firm. Realizing the importance of accounting to your new duties, you have recently completed an intensive introductory course in financial accounting. In thi
> Privately owned BlueScreen Corporation is primarily a retailer of computer equipment for individuals and small business. The company also develops software intended for small business applications—that is, for companies with up to 500 employees. The soft
> Discuss the bias, objectives, and potential conflicts that may exist between the following users/groups: 1. Bank with a current ratio debt covenant and management of a public company with a bonus based on net income 2. Bank assessing whether to extend ad
> The CPA Canada Handbook in both Part I and Part II sets out the objectives of general purpose financial statements, but companies and their managers have objectives that relate to their specific circumstances. Explain how managers’ objectives impact the
> The reporting situations of two different companies are described below: 1. Stardust Explorations Incorporated (SEI) is seeking significant new financing for a gold and diamond mining venture in northern Ontario. In their search for new financing, compan
> Which measurement method would be most appropriate for the following items: historical cost or current value? For current value, specify which of the three measurement bases applies. 1. Decommissioning costs 2. Shares in a public company 3. Land 4. Lease
> Four different unrelated Canadian corporations are described below: 1. Privately owned Vancouver-based Moonburst Coffee Ltd. imports coffee beans from around the world, but mainly from South America. The company roasts and packages the coffee and distrib
> A manager of a medium-sized private company recently asked for your advice on the following: I’m very confused about whether our company should continue to use ASPE or convert to IFRS. Our Canadian bank requires that we stay under a specific debt-to-equi
> For each of the situations below, explain whether the company can use its preferred basis of accounting: 1. A Great Lakes shipping company based in Thunder Bay, Ontario, wishes to use U.S. dollars as its presentation currency. Shipping on the Great Lakes
> A private company has two debt covenants in place: 1. Maximum debt-to-equity ratio. Current and long-term liabilities, excluding future income taxes, are divided by total shareholders’ equity. 2. Minimum times-interest-earned ratio. Income before interes
> For each of the situations listed below, state what judgements and/or estimates are necessary when preparing financial statements at each business’s fiscal year-end of 31 January: 1. Due to no snow fall in December, a ski store has an unexpectedly large
> You have recently attended a conference on behalf of your manager. One speaker from a large bank, Mr. Stearns, stated: With the advent of international accounting standards, we now can easily compare the financial results of companies across borders when
> The IASB is the standard-setting body for IFRS. Anyone who uses financial statements should understand the process by which standards are set. Required: Consult the IASB website (http://www.ifrs.org). Click “About us,” then “How we set IFRS® Standards.”
> Indicate whether the use of IFRS or ASPE is either required or more likely for the following entities as preparers of financial statements:
> The language of accounting is littered with acronyms, abbreviations for common organizations or phrases. Match the phrase or organization on the left with its abbreviation. Phrase or Organization 1. International Accounting Standards Board 2. Accounting
> Indicate whether each statement is true or false: 1. IFRS and the CPA Canada Handbook, Part II, have equal status in Canada for financial reporting. 2. In a private corporation, the needs of external users have no impact on the company’s financial report
> At the beginning of 20X5, its first year of business, Marsalis Ltd. invested $64,000 in inventory and $300,000 in equipment. Total sales were $160,000. Of the initial inventory purchases, $25,000 remained in inventory at the end of the period. Marsalis d
> Indicate whether each statement is true or false: 1. The IASB has authority for setting Canadian accounting standards. 2. All Canadian corporations must comply with international accounting standards. 3. Most public Canadian corporations are listed on th
> On 3 January 20X5, London Company entered into a joint arrangement with two other investors to develop a gold mine called JDX Gold. Based on the contractual arrangement, London will have rights to the net assets and net income of JDX Gold. London has a 2
> On 3 January 20X4, Windsor Company purchased 30% of the shares of Brampton for $565,000 cash. Windsor will use the equity method. On this date, Brampton has $2,000,000 of assets, $1,600,000 of liabilities, and $400,000 of equity. Book values reflect fair
> In 20X1, FYY Ltd. purchased 500 shares of Humor Inc. for $6,000 plus $500 in commission. The shares had a fair value of $19,000 at the end of 20X1, $25,000 at the end of 20X2, and $40,000 at the end of 20X3. In 20X4, the shares were sold for $31,000 less
> On 30 June 20X2, King Ltd. purchased 10,000 shares of Prince Inc. for $12,000 plus $1,000 in commission. In 20X2, the company received $500 of dividends, and the shares had a fair value of $16,000 at the end of the year. In 20X3, there were no dividends
> On 1 January 20X2, Speedy Company purchased $3,000,000 of Wind Corp. 3% bonds, classified as an FVOCI-Bond investment for $2,737,438. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase
> On 1 January 20X2, Lucky Company purchased $5,000,000 of Fire Corp. 3% bonds, classified as a FVTPL. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 4% on the date of purchase. The bonds mature on 30 December
> On 1 January 20X4, Queen Company purchased $5,000,000 of Sport Corp. 7% bonds, classified as an FVOCI-Bonds investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds ma
> IFRS or ASPE? - 20% investment in publicly traded company. Significant influence exists. - 25% investment in private company. Significant influence exists. - 70% investment in private company. Control exists. - 75% investment in publicly traded company.
> Oundjian Corporation recently sold inventory for $140,000. The goods had originally cost $94,000. Inflation during the period was 5%. The goods could be replaced from their long-time supplier for $115,000. For simplicity, assume that there are no other c
> IFRS or ASPE ? - Investment in 10-year bonds. Bonds were purchased when interest rates were high. Rates are expected to decline, and when this happens the bonds will be sold. - Investment in 10-year bonds with the intention to hold until maturity. Howeve
> On 1 July 20X2, a company bought an investment in IBM bonds at par for US$50,000 when the exchange rate was US$1 = Cdn$1.12. The investment is classified as FVTPL. The company paid cash on the acquisition date. At 31 December, the exchange rate was US$1
> On 1 January 20X2, Investor Company purchased $1,000,000 of Operating Corp. 5% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 6% on the date of purchase. The bonds matu
> Montonne Corp. is a private company that complies with ASPE. Montonne has a piece of equipment that cost $254,000. Its useful life to the company is estimated to be 15 years, after which it is expected to have a net residual value of $125,000. The equipm
> Bovine Ltd. has the following assets in a CGU: The recoverable amount has been determined to be $1,500. The separate fair value less costs of disposal for land is $600; no other assets could be separately valued. Required: 1. Allocate the impairment loss
> Food Inc., a public company, has a machine that processes and packages tuna in oil. This machine cannot be used for any other purpose. The machine originally cost $100,000 and is being amortized on a straight-line basis over 20 years. The carrying amount
> Innovative Inc. has a piece of equipment with a carrying amount of $175,000. Technology has changed, indicating that the machine may be impaired. A new machine with updated technology could be purchased for $350,000. A used machine of similar vintage is
> Phillips Ltd. purchased a machine on 26 March 20X3 for $90,000 and began to use it immediately. The estimated useful life of the machine is 5 years, and it has an expected residual value of $10,000 at that time. Phillips uses straight-line depreciation.
> XYZ Inc. has a building it purchased for $400,000. It is estimated the building has a useful life of 25 years and zero residual value. The building has three major components. XYZ uses the straight-line method of depreciation. Required: 1. What is the am
> Vert Ltd. purchased a vehicle on 1 January 20X8 for $34,000 and began to use it immediately. The estimated physical life of the vehicle is 20 years, but the estimated useful life to Vert is 10 years. The vehicle has an estimated residual value of $8,000.
> In the blanks provided to the left below, enter the letters of the underlying assumption, measurement method, qualitative criteria, or constraint most closely associated with the statements. Some letters may be used more than once and some may not be use
> Indicate whether the use of IFRS or ASPE is either required or more likely for the following entities as preparers of financial statements:
> Bailey Delivery Company, Inc., was organized in 2021 in Wisconsin. The following transactions occurred during the year: a. Received cash from investors in exchange for 10,000 shares of stock (par value of $1.00 per share) with a market value of $4 per sh
> Higgins Company began operations last year. You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. On January 1, the start of the current year, Higgins’ T-account balances wer
> Consolidated Edison, Inc. (Con Edison), is a public utility company operating primarily in New York whose annual revenues exceed $12 billion. It reported the following December 31 simplified balances in its statement of stockholders’ eq
> Gordon Company started operations on January 1 of the current year. It is now December 31, the end of the current annual accounting period. The part-time bookkeeper needs your help to analyze the following three transactions: a. During the year, the comp
> Preparing an Income Statement and Balance Sheet Analytics Corporation was organized on January 1, current year. At the end of the current year, the following financial data are available: Complete the following two statements:
> Emily Company uses a periodic inventory system. At the end of the annual accounting period, December 31 of the current year, the accounting records provided the following information for product 2: Required: Prepare a separate income statement through pr
> The Hershey Company is a global confectionery leader known for its branded portfolio of chocolate, sweets, mints, and other great-tasting snacks. The Company has more than 80 brands worldwide including such iconic brand names as Hershey’
> Griffin Service Company, Inc., was organized by Bennett Griffin and five other investors (that is, six in total). The following activities occurred during the year: a. Received $70,000 cash from the six investors; each investor was issued 8,400 shares of
> Campbell Soup Company is the world’s leading maker and marketer of soup and sells other well-known brands of food in 160 countries. Presented here are the items listed on a simplified version of its recent balance sheet (dollars in mill
> Macy’s, Inc., operates the two best-known high-end department store chains in North America: Macy’s and Bloomingdale’s. The following simplified data (in millions) were taken from its recent annual re
> Target Corporation, is a general merchandise retailer that sells products through its stores and digital channels. The company offers everyday essentials and merchandise at discounted prices. The items reported on its income statement for an earlier year
> A + T Williamson Company is making adjusting entries for the year ended December 31 of the current year. In developing information for the adjusting entries, the accountant learned the following: a. A two-year insurance premium of $4,800 was paid on Octo
> Completing a Balance Sheet and Inferring Net Income Bennett Griffin and Chula Garza organized Cole Valley Book Store as a corporation; each contributed $80,000 cash to start the business and received 4,000 shares of common stock. The store completed its
> Pool Corporation, Inc., is the world’s largest wholesale distributor of swimming pool supplies and equipment. It is a publicly traded corporation that trades on the NASDAQ exchange under the symbol POOL. It sells these products to swimm
> Pool Corporation, Inc., reported in its recent annual report that “In 2010, our industry experienced some price deflation. . . . In 2011, our industry experienced more normalized price inflation of approximately 2 percent overall despit
> Pool Corporation, Inc., sells swimming pool supplies and equipment. It is a publicly traded corporation that trades on the NASDAQ exchange. The majority of Pool’s customers are small, family-owned businesses. Assume that Pool issued bonds with a face val
> Pool Corporation, Inc., is the world’s largest wholesale distributor of swimming pool supplies and equipment. Assume Pool Corporation purchased for cash new loading equipment for the warehouse on January 1 of Year 1, at an invoice price of $72,000. It al
> Keurig Dr Pepper, is a leading worldwide integrated brand owner, bottler, and distributor of non-alcoholic beverages. Key brands include Dr Pepper, Snapple, 7-UP, Mott’s juices, A&W root beer, Canada Dry ginger ale, Bai antioxidant
> Brothers Herm and Steve Hargenrater began operations of their tool and die shop (H & H Tool) on January 1, 1987, in Meadville, PA. The annual reporting period ends December 31. Assume that the trial balance on January 1, 2023, was as follows: Transac
> Aubrae and Tylor Williamson began operations of their furniture repair shop (Furniture Refinishers, Inc.) on January 1, 2019. The annual reporting period ends December 31. The trial balance on January 1, 2024, was as follows: Transactions during 2024 fol
> Using Financial Reports: Identifying and Correcting Deficiencies in an Income Statement and Balance Sheet Precision Corporation was organized on January 1, 2021. At the end of 2021, the company had not yet employed an accountant; however, an employee who
> Refer to the information regarding Bill’s Catering Company in AP4-3. Required: 1. Indicate whether each transaction relates to a deferred revenue, deferred expense, accrued revenue, or accrued expense. 2. Using the following headings, i
> Broadening Financial Research Skills: Locating Financial Information on the SEC’s Database The Securities and Exchange Commission (SEC) regulates companies that issue stock on the stock market. It receives financial reports from public companies electron
> Comparing Companies within an Industry Refer to the following: • Target Corporation in Appendix B, • Walmart Inc. in Appendix C, and the • Industry Ratio Report in Appendix D at the end of this book.
> Refer to the financial statements of Walmart given in Appendix C at the end of this book. At the bottom of each statement, the company warns readers that “The accompanying notes are an integral part of these financial statements.” The following questions
> Refer to the financial statements of Target Corporation in Appendix B at the end of this book. All dollar amounts are in millions. 1. Did the company accrue more or pay more for wages and benefits in the most recent fiscal year and by how much? a. Target
> Refer to the financial statements and footnotes of Walmart given in Appendix C at the end of this book. All dollar amounts are in millions. Round your answers to two decimal places. For calculations that require net income, use the “Consolidated net inco
> Refer to the financial statements and footnotes of Target given in Appendix B at the end of this book. All dollar amounts are in millions. Round your answers to two decimal places. Required: 1. For the most recent fiscal year, compute the return on equit
> Refer to the financial statements of Target (Appendix B) and Walmart (Appendix C), and the Industry Ratio Report (Appendix D) at the end of this book. Required: 1. Compute the quality of income ratio for both companies for the most recent reporting year.
> Refer to the financial statements of Walmart given in Appendix C at the end of this book. Required: 1. On the statement of cash flows, what was the largest item (in absolute value) listed under “Adjustments to reconcile consolidated net income to net cas
> Refer to the financial statements of Target given in Appendix B at the end of this book. Required: 1. Does Target, use the direct or indirect method to report cash flows from operating activities? How did you know? a. Direct because it lists the individu
> A recent annual report for Apple Inc. contained the following information (dollars in millions): In 2020, Apple declared dividends equal to $0.795 per share. Assume all of the dividends were paid with cash by year end. Approximately how much cash in tota
> South Bend Repair Service Co. keeps its records without the help of an accountant. After much effort, an outside accountant prepared the following unadjusted trial balance as of the end of the annual accounting period on December 31: Data not yet recorde
> Refer to the financial statements of Target (Appendix B) and Walmart (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book. Required: 1. Compare basic earnings per share for Target and Walmart. 2. How would repurchasing treasury
