South Company, a public company, sells large construction equipment. On 1 January 20X5, the company sold North Company a machine at a quoted price of $120,000. South collected $40,000 cash and received a two-year note payable for the balance. Required: 1. Give South’s required entries for the two years, assuming an interest-bearing note, face value $80,000 (8% interest, simple interest, payable every 31 December and 8% market rate). 2. Assume that the market interest rate is still 8%. Give South’s required entries for the two years, assuming a 2% interest-bearing note, face value $80,000. Prepare the entries based on the gross basis. 3. Compare the interest revenue and sales revenue under requirements 1 and 2. 4. Repeat requirement two above. Assume South is a private company that uses ASPE and has decided to use straight-line amortization.
> Hansard Ltd. estimates its quarterly inventory by the retail inventory method. The following data are available for the quarter ended 30 June 20X7: Required: Prepare a schedule to compute the estimated inventory at 30 June 20X7.
> The manager of Seaton Books Ltd., a book retailer, requires an estimate of the inventory cost for a quarterly financial report to the owner on 31 March 20X5. In the past, the gross margin method was used because of the difficulty and expense of taking a
> You are auditing the records of Lin Corp. The company took a physical inventory under your observation. However, the valuations have not been completed. The records of the company provide the following data: sales, $400,000 (gross); returned sales, $17,5
> 1. Case A Internal auditors for Sandu Corp. discovered during 20X4 that finished goods inventory of $800,000 had been shipped to a customer on 30 December 20X3, the last working day of the year. The ending inventory for 31 December 20X3 had been properly
> Flint Publishers Inc. prepared its draft 20X6 financial statements in February 20X7. The draft SCI showed earnings of $1,100,000. After the draft statements were prepared, but prior to their approval and release, the external auditors discovered several
> On 31 December 20X5, Office Systems Ltd.’s books showed an ending inventory valuation of $490,000. The accounts for 20X5 have been adjusted and closed. Subsequently, the bookkeeper prepared a schedule that showed that the inventory should be $569,800, no
> Digger Enterprises Ltd. has prepared the following information to support an inventory valuation as of 31 December 20X3 (in thousands of dollars): 1. Physical count, 31 December 20X3: Cdn$60,000 2. Advance payment for inventory due before year-end but no
> During 20X7, Omega Corp. signed a contract with Alpha Inc. to purchase 20,000 subassemblies at $90 each during 20X8. Required: 1. On 31 December 20X7, the end of the annual accounting period, the financial statements are to be prepared. Assume that the c
> Pino Inc. (Pino) is a BC-based wine producer. In anticipation of a particularly bounteous grape harvest and a potential problem in obtaining a sufficient volume of shipping crates, Pino entered into a noncancellable agreement with Lumber Products Ltd. to
> Olson Metrics Ltd. has been the dominant firm in its field. The company’s most popular product has been the Model T, which carries a retail price of $350. The Model T costs $250 per unit to produce. Recently, the company introduced a new version, Model A
> 1. Voluntary accounting policy change 2. Involuntary accounting policy change 3. Change in accounting estimate 4. Correction of an error 5. None of the above 1. _____ 1. This is the first year the company has incurred costs for development of a new produ
> Telma Ltd. (Telma) is a public company incorporated in Alberta and traded on the Toronto Stock Exchange. In December 20X6, Telma management decided that cost exceeded NRV for a significant portion of the inventory. Consequently, the company wrote the Cla
> The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Electronics Corp.: Required: 1. Determine the valuation of the above inventory at cost and at lower of cost or NRV, assuming application of
> The records of Loren Movers Ltd. contained the following inventory data: Required: 1. Calculate two different amounts that could justifiably be recorded as the allowance to reduce inventory to lower-of-cost-or-NRV at the end of 20X1. 2. Record the 20X1 l
> At the end of 20X4, Sherpa Lighting Ltd. has a large stock of incandescent lighting fixtures that are becoming obsolete due to a new trend to low-energy fluorescent and LED lighting fixtures. The current inventory of incandescent fixtures has a cost of $
> At the end of 20X5, Singh Inc. has four inventory items, two of which management believes should be written down. The cost and estimated NRVs of the items are as follows: Required: 1. Determine the amount by which the inventory should be written down if
> Alomar Ltd. has been suffering the effects of strong price competition on a particular inventory item from an overseas company that has moved into Alomar’s Canadian market. At the end of 20X4, Alomar management decided that the carrying cost (at historic
> Oporto Corp. produces and sells forklift trucks. Model 17A (the “Protex”) has a list price of $140,000. The production cost for the 20 finished Protex units in inventory at the end of 20X4 was $120,000 per unit. Due to recent improvements in manufacturin
> Rondo Ltd. (RL) is a wholesaler operation, with an active warehouse. Staff at RL have prepared a preliminary list of inventory, following its count on November 30. 1. Goods counted in the physical inventor $280,000 2. Provincial sales tax on the amount i
> Mobile Technology Ltd. reported an unadjusted balance of accounts receivable of $1,285,000 at 31 December 20X3, along with a credit balance in the allowance for doubtful accounts of $83,100 and an allowance for sales discounts of $6,000. At year-end, the
> Information related to accounts receivable is given: At the beginning of the year, Health Products Corp. has a balance of $2,450,000 in accounts receivable and $220,000 in the allowance for doubtful accounts. Sales for the year were $19,300,000, of which
> In preparing the year-end financial statements for 20X7, the controller of Risk ’n Save Inc. discovered that the opening inventory for 20X6 had been overstated by $20,000. The company has a 20% income tax rate. Required: 1. How will discovery of this err
> At 31 December 20X8, Small Ltd. reported gross accounts receivable of $2,481,800. Investigation showed the following: 1. The credit balance in the allowance for doubtful accounts was $182,400 after write-offs for the year but before any bad debt adjustme
> The net accounts receivable on the books of GJY Corp. as of 1 January 20X3 are as follows: Accounts receivable $ 281,000 Less: Allowance for sales discounts 6,000 Allowance for doubtful accounts 20,650 $254,350 During the year, the sales discount allowa
> The accounts of Polaris Company provided the following 20X5 information at 31 December 20X5: Accounts receivable $ 1,899,000 (dr.) Allowance for sales discounts 23,500 (cr.) Allowance for doubtful accounts 134,900 (cr.) Total credit sales revenue during
> The following is a list of independent scenarios. Assume that each corporation adopts IFRS. 1. Raja Inc. purchases eight percent of the outstanding shares of Yajoo Inc. 2. Ding Inc. purchases preferred shares of Ming Inc., knowing it will earn a set divi
> The graph below shows the trend in percentage of uncollectible accounts receivables over a five-year period at Luna Incorporated. Required: 1. Interpret the graph and determine, with an explanation, whether the trend is desirable or undesirable. 2. What
> Graphs for two competitor companies, Tera Inc. and Tulum Inc., are provided below, showing comparisons of the percentage of accounts receivable that are uncollectible by age and by customer segment. Required: Interpret the graphs and recommend, with an e
> You are the controller at ABC Corp. You have hired an intern to work with you over the summer. The intern is very ambitious and curious, and plans to obtain her CPA designation. When you arrive at your office on Tuesday morning the intern is waiting at t
> The following are independent transactions related to accounts receivable and notes receivable. 1. Breanna Corporation, a manufacturer of pet toys, sold equipment for $500,000 on the last day of the financial year. On that date, a note receivable was sig
> Primary Incorporated (PI) sells merchandise across North America. PI is a growing company and has doubled its customer base over the past few years, owing largely to its generous and flexible credit policies. PI offers early payment discounts at various
> Maria Kay works at a private corporation, Mita Corporation, as a sales manager. Due to a bad flu season, several accounting personnel have been away for extended periods of time and Maria has been charged with entering sales transactions and customer pay
> Arboretum Ltd. has been depreciating its production equipment on a straight-line basis over ten years, taking a full year’s depreciation in the year of acquisition and assuming no residual value at the end of the equipment’s life. The company had investe
> Sumarah Corp. accepted a $450,000 two-year note receivable from a customer in connection with a major inventory sale transaction on 1 October 20X5. The note was interest-free, although market interest rates were in the range of 8%. Required: 1. Can the c
> The following is a list of independent scenarios. Assume that each corporation adopts ASPE. 1. A company holds cryptocurrencies, which are held for sale in the ordinary course of operations. 2. A corporation has an outstanding note receivable of $200,000
> Epsilon Ltd. accepted a $600,000 two-year note receivable from a customer in connection with a major inventory sale transaction on 1 January 20X5. The note required annual end-of-year interest payments of 2%, and the principal was due at the end of 20X6.
> April Ltd. reported various selected balances in its 31 December 20X7 unadjusted trial balance: Accounts receivable $1,800,000 dr. Special accounts receivable 225,000 dr. Accounts receivable—U.S. 116,000 dr. Allowance for doubtful accounts 158,050 cr. Al
> Lerin Corp. had the following transactions in 20X1: 1. Sold goods on 3 January to a U.S. customer for US$400,000 with terms 2/10, n/30. 2. Received full payment for the 3 January sale on January 30. 3. Sold goods on 15 February to a U.S. customer for US$
> Johnston Ltd. had the following transactions in 20X5: 1. Sold goods on 1 June to a British customer for 140,000 euros with payment to be in four months. 2. Sold goods to a U.S. customer on 15 June for US$300,000; payment was due in one month. 3. Sold goo
> Grand Ltd. is a Canadian company that had the following transactions in 20X7: 1. Sold goods to a customer in Belgium on 25 November for 220,000 euros. 2. Sold goods to a U.S. customer on 25 November for US$80,000. 3. Sold goods on 1 December, to a Britis
> On 1 January 20X5, Spencer Inc. sold merchandise (cost, $8,000; sales value, $14,000) to Bryden Inc. and received a non-interest-bearing note in return. The note requires $15,730 to be paid in a lump sum on 31 December 20X6. On initial recognition of the
> Omega Chemicals Ltd. took a $420,000 two-year note receivable from a customer in connection with a major sale transaction on 1 May 20X7. The note required annual 30 April interest payments of 3%, and the principal was due on 30 April 20X9. Omega has a 31
> Cambria Ltd. took a $250,000 two-year note receivable from a customer in connection with a major inventory sale transaction on 1 January 20X5. The note required annual end-of-year interest payments of 4%, and the principal was due at the end of 20X6. Req
> Oleander Corp. had total assets of $1,200,000 on 31 December 20X3. At 31 December 20X4, total assets had increased to $1,400,000. Oleander’s statement of changes in equity disclosed the following amounts at the beginning and end of 20X4
> Indicate whether each statement is true or false. If the statement is false, provide a brief explanation of why it is false. 1. A private company based in Canada must follow the recommendations of the CPA Canada Handbook. 2. A company that reports in U.S
> Bento Corp. took a $500,000 four-year, 4% note receivable from a customer in connection with a major sale transaction. The note required annual blended payments, to be paid at the end of each year. The market interest rate is 4%. Required: 1. Calculate t
> MacWilliams Ltd. sold a $90,000 piece of machinery to a customer on 1 January 20X6, and took back a two-year, 2% note receivable. The customer has to pay interest every 31 December, but the $90,000 principal is due only after two years. Market interest r
> 1. Chequing account balance at Bank A $190,000; cash on hand $5,000; petty cash $2,000; NSF cheque received from customer $1,000; chequing account balance at Bank B $10,000 2. Chequing account balance at Bank C, Account #121 $400,000; salary cash advance
> On 1 May 20X8, Jain Company sold merchandise to a customer and received a $110,000 (face amount), one-year, non-interest-bearing note. The going (i.e., market) rate of interest is 6%. Discounting must be used to value the transaction. The annual reportin
> Lincraft Corp. reports a current ratio of 3-to-1 in its 20X2 financial statements. The statement of financial position shows current assets of $3,116,500 and current liabilities of $1,040,100. Lincraft has accounts receivable of $1,267,300. The company t
> On 1 April 20X5, XCourt Company transferred $75,000 of accounts receivable to Prima Finance Company to obtain immediate cash. Consider the two following independent circumstances. Required: 1. The transfer agreement specified a price of $64,200 on a no-r
> Appa Apparel manufactures fine sportswear for many national retailers and frequently sells its receivables to financing companies as a means of accelerating cash collections. Appa transferred $600,000 of receivables from retailers to a financing company
> Belanger Ltd. reports a current ratio of 2-to-1 in its 20X2 financial statements. The statement of financial position shows current assets of $2,540,500 and current liabilities of $1,284,000. Accounts receivable are $745,900 of the current assets. Belang
> At 31 December 20X9, the end of the annual reporting period, the accounts of Huron Company showed the following: 1. Allowance for doubtful accounts, balance 1 January 20X9, $22,700 credit. 2. Accounts receivable, balance 31 December 20X9 (prior to any wr
> Identify if the following related party transactions in ASPE would be measured at the exchange amount (EA) or the carrying value (CV). The company sells computer equipment and software. 1. Computer equipment sold to board member with 5% standard discount
> Accounts receivable for Smith Ltd. were reported on the statement of financial position prepared at the end of 20X8, as follows: Accounts receivable $122,900 Less: Allowance for doubtful accounts 3,530 $119,370 In 20X9, the following transactions took pl
> The accounting records of Sine.Com Ltd. provided the following for 20X9: Balance in accounts receivable, 1 January 20X9 $ 90,000 Balance in accounts receivable, 31 December 20X9 120,000 Balance in allowance for doubtful accounts, 1 January 20X9 3,000 (cr
> The accounts of Long Company provided the following 20X5 information at 31 December 20X5 (end of the annual period): Accounts receivable balance, 1 January 20X5 $51,000 Allowance for doubtful accounts balance, 1 January 20X5 3,000 Uncollectible account t
> The disclosure note of Big Products Ltd. showed the following (in millions): Required: 1. Define financial instrument and financial asset. 2. With respect to cash, explain why the asset is classified as FVTPL. Under what circumstances would the fair valu
> Carnegie Corp. commissions, produces, and sells books through faith-based nonprofit organizations. The books are sold on the basis that a maximum of 50% of the quantity purchased can be returned within six months. The contract with the customer outlines
> Dominum Corp. is a mining company that mines, produces, and markets teledine, a common mineral substance. The mineral is mined and produced in one large batch per year, as the mine is accessible only for a brief period in the summer due to severe weather
> Maypole Industries imports goods from Taiwan and resells them to domestic Canadian markets. Maypole uses a perpetual inventory system. A typical transaction stream follows: 18 July: Purchased goods for $456,000. 24 August: Goods repackaged and ready for
> Shawinegan Development Co. (SDC) conducts research and development on specific projects under contract for clients; SDC also conducts basic research and attempts to market any new products or technologies it develops. In January 20X4, scientists at SDC b
> Luke Windows Ltd. manufactures custom-made windows for homes. The company deals directly with some individual customers, but mainly does business with contractors that are building tract housing under contract with a developer—that is, a real property de
> Rory Inc. is a manufacturer of windows. Rory primarily sells to residential builders who take delivery of the windows only when the house is at the stage at which the windows can be immediately installed. Consequently, builders will order the total numbe
> The first list below shows the financial statements normally included in a company’s annual financial statements. The second list shows some amounts that often appear in those financial statements. 1. SFP 2. Statement of comprehensive income—profit and l
> The cases given below for 20X5 are independent of each other. In each, assume that the accounting period ends 31 December. Case A On 31 December 20X5, Zulu Sales Co. sold a machine for $100,000 and collected $30,000 cash. The remainder plus 10% interest
> A physiotherapy clinic tracks all customer appointments and payments using their custom booking system. For a select number of insurance providers, the clinic is able to direct bill the insurance company on behalf of the customer. 2. An airline uses its
> A boutique spa provides a variety of services to customers. As a way to retain customers, the spa provides a loyalty program in which customers earn a $10 future service credit for every $200 spent during the period. During the month of April, the spa ea
> Jefferson Contracting enters into a contract with a customer to build a new café. The café is conveniently located on a long stretch of highway that, with a number of other rest stations including a gas station, is known to be very busy. The customer pay
> McNicol Investing (MI) prepares a biweekly investing newsletter that is distributed to subscribers. Information contained in the report is the result of a significant amount of research and has proven to be a great tool for those interested in managing t
> XYZ Co. had a variety of revenue transactions during the year. Below are the balances on the SFP related to its revenue transactions. Required: Using the information in the table, explain the effects that the revenue transactions would have on the SCF, a
> Winnipeg Development Corp. (WDC) was contracted to construct a new hospital for $1.82 billion. The hospital is located on government land and therefore owned by the customer throughout the contract period. This being so, WDC has determined that they meet
> Narayna Construction Corporation was contracted to build a new retail complex in a small town in northern Saskatchewan for $6,375,000. Construction activities are summarized below by year: Required: 1. Prepare the journal entries for revenue recognition
> Buildit Corp. was contracted to construct a building for $1,600,000. The contract provided for progress payments. Buildit’s accounting year ends 31 December. Work began under the contract on 1 March 20X3, and was completed on 30 November 20X5. Constructi
> Thrasher Construction Co. was contracted to construct a building for $975,000. The building is owned by the customer throughout the contract period. The contract provides for progress payments. Thrasher’s accounting year ends 31 December. Work began unde
> On 1 April 2015 Ski Inc. (SI) announced that it was going to sell its two ski clubs that were in Western Canada. The western market is very competitive for many ski clubs. SI has decided to focus only on clubs operating in Ontario and Quebec. It is curre
> For each of the following independent items, indicate when revenue should be recognized. 1. Interest on loans made by a financial institution, receivable in annual payments. 2. Interest on loans made by a financial institution, receivable in three years
> Star Construction Corp. has a contract to construct a building for $10,950,000. The building is controlled by the customer throughout the term of the contract. Total costs to complete the building were originally estimated at $8,850,000. Construction com
> Basile Corporation (Basile) manufactures and sells pre-made custom doors and related accessories. Basile is a private corporation owned by two non-related individuals. In May 20X6, sold some of their products to Nattah Photography Inc. (Nattah) (which wi
> Apricot Candy Inc. (ACI) manufactures non-GMO, plant-based snacks. In November 20X4, ACI supplied $12,700 worth of snacks to Planet Food (PF), a boutique health food store. The cost to manufacture the snacks sold to PF was $9,800. PF plans to sell these
> Dominion Mobile Inc. provides cellular phone services. The company conducts a special sales campaign in which new subscribers will get a high-end cell phone for only $100 if they sign a 36-month contract that has a service fee of $100 per month. Thus, th
> BigBoy Equipment Inc. sells heavy-duty forklift trucks. Model 217A has a stand-alone price of $140,000. BigBoy offers to sell the 217A inclusive of a three-year service contract for $180,000. Required: Prepare a journal entry to record the sale of one Mo
> Chapnik Equipment Corp. (CEC) produced custom-designed machinery for a long-time customer. The direct cost to produce the machinery was $1.4 million. CEC sold the equipment to the customer for $2.0 million. The machinery was delivered, installed, and tes
> On 30 April 20X2, Neuman Ltd. sells a product to a customer for $600,000. The product carries a one-year assurance warranty. Neuman management estimates that the probable cost of fulfilling the warranty will be $50,000. Between 1 May and 31 December 20X2
> Beaver Ltd. is a retail company that sells sporting goods. It has a customer loyalty program that allows customers to earn points based on sales made. These points can be accumulated and used for future purchases. One customer loyalty point is awarded fo
> GoRight Inc. (GRI) is a franchisor who sells the rights to its trademark to franchisees. The franchisee pays an upfront, nonrefundable deposit of $1,000. This amount is used to cover the expenses for GRI performing a check on the franchiseeâ€&
> Drabinski Ltd. decided on 1 July 20X3 to dispose of an asset group consisting of land, a building, and equipment. An active plan of disposal is being carried out, and sale is highly probable within the following year. The assets’ carryi
> McLaughlin Novelty Corp. (McLaughlin) developed an unusual product, electric clip-on eyeglass wipers. McLaughlin felt the product would appeal to hikers, joggers, and cyclists who engaged in their sports in rainy climates. Because retail establishments w
> A company sells books through the Internet. The company obtains the books from the publishers and carries them in inventory for immediate shipment. Customer payment is by credit card. 2. An interior design company operates a showroom. Furniture manufactu
> Statement of financial position, statement of comprehensive income data, and additional information are provided below for Supreme Co. Additional information: 1. Purchased a capital asset, $9,000; payment by issuing 600 common shares. 2. Payment at matur
> Refer to the data in A5-6. Required: Prepare the complete SCF, in good form, using the direct method in the operating activities section. Include the required note disclosure of non-cash transactions. Omit the separate disclosure of cash flow for interes
> Grand Corp.’s 20X2 financial statements reflect the following: Additional information: During the year, equipment with an original cost of $82,000 was sold for cash. Required: 1. Prepare the SCF in good form using the indirect method fo
> The financial statements for Totten Limited are shown below: During the year, the company purchased a capital asset valued at $30,000; payment was made by issuing common shares. Additional capital assets were acquired for cash. Unexplained changes in acc
> Statement of financial position balances as at 31 December 20X8 and 20X9 are provided below for Laurel Inc. Laurel Inc. additional information: - Net earnings for 20X9 were $712,000. - Equipment with an original cost of $400,000 and a NBV of $150,000 was
> The records of Rangler Paper Co. reflect the select data provided below for the reporting period ended 31 December 20X5. Required: Prepare the SCF using the indirect method for operating activities. Group all changes in non-cash working capital in operat
> Ronald Corp. is a privately owned candy maker. The graph below provides information on cash flow activities for Ronald Corp. for the eight-year period 20X2 to 20X9. Required: Interpret the results of the graph and explain the nature of Ronald Corp.â
> Graphs for two companies, Ming Ltd. and Tom Ltd., are provided below, showing comparisons of net earnings and cash flows over a period of time. Required: Interpret the graphs and conclude, with an explanation, on which company appears to have a better qu
> On 13 September 20X1, Nitish Corp.’s board of directors moved the company’s operations into a newly constructed building and declared its old building available for sale. The original cost of the old building was $20 million; it was 40% depreciated. Othe
> Account balances, taken from the ledger of Argot Flooring Ltd. as of 31 December 20X5, appear below. Additional information: 1. Store supplies were counted at 31 December and found to be valued at $5,600. 2. Depreciation of building and equipment is over
