Wavecrest Inc. reported income from continuing operations before tax of $1,790,000 during 2017. Additional transactions occurring in 2017 but not included in the $1,790,000 are as follows: 1. The corporation experienced an insured flood loss of $80,000 during the year. 2. At the beginning of 2015, the corporation purchased a machine for $54,000 (residual value of $9,000) that has a useful life of six years. The bookkeeper used straight-line depreciation for 2015, 2016, and 2017, but failed to deduct the residual value in calculating the depreciable amount. 3. The sale of FV-NI investments resulted in a loss of $107,000. 4. When its president died, the corporation gained $100,000 from an insurance policy. The cash surrender value of this policy had been carried on the books as an investment in the amount of $46,000 (the gain is non-taxable). 5. The corporation disposed of its recreational division at a loss of $115,000 before tax. Assume that this transaction meets the criteria for accounting treatment as discontinued operations. 6. The corporation decided to change its method of inventory pricing from average cost to the FIFO method. The effect of this change on prior years is to increase 2015 income by $60,000 and decrease 2016 income by $20,000 before taxes. The FIFO method has been used for 2017. Instructions: (a) Prepare an income statement for the year 2017, starting with income from continuing operations before income tax. Calculate earnings per share as required under IFRS. There were 80,000 common shares outstanding during the year. (Assume a tax rate of 30% on all items, unless they are noted as being non-taxable.) (b) Assume that beginning retained earnings for 2017 is $2,540,000 and that dividends of $175,000 were declared during the year. Prepare the retained earnings portion of the statement of changes in equity for 2017. (c) Discuss how proper classification and disclosure of items on the income statement help users in making their investment and credit decisions.
> Lian Tang, HK Corporation’s controller, is concerned that net income may be lower this year. He is afraid that upper-level management might recommend cost reductions by laying off accounting staff, himself included. Tang knows that depreciation is a majo
> On October 1, 2017, Healy Farm Equipment Corp. sold a harvesting machine to Homestead Industries. Instead of a cash payment, Homestead Industries gave Healy Farm Equipment a $150,000, two-year, 10% note; 10% is a realistic rate for a note of this type. T
> The statement of financial position of Alice Inc. at December 31, 2016, includes the following: Transactions in 2017 include the following: 1. Accounts receivable of $146,000 were collected. This amount includes gross accounts of $50,000 on which 2% sa
> The following information relates to Shea Inc.’s accounts receivable for the 2017 fiscal year: 1. An aging schedule of the accounts receivable as at December 31, 2017, is as follows: 2. The Accounts Receivable control account has a de
> From its first day of operations to December 31, 2017, Campbell Corporation provided for uncollectible accounts receivable under the allowance method: entries for bad debt expense were made monthly based on 2.5% of credit sales, bad debts that were writt
> Fortini Corporation had record sales in 2017. It began 2017 with an Accounts Receivable balance of $475,000 and an Allowance for Doubtful Accounts of $33,000. Fortini recognized credit sales during the year of $6,675,000 and made monthly adjusting entrie
> A series of unrelated situations follow: 1. Atlantic Inc.’s unadjusted trial balance at December 31, 2017, included the following accounts (accounted for using ASPE): 2. An analysis and aging of Central Corp.’s accou
> Joseph Kiuvik is reviewing the cash accounting for Connolly Corporation, a local mailing service. Kiuvik’s review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2017. He has collected the fo
> The Patchwork Corporation manufactures sweaters for sale to athletic-wear retailers. The following information was available on Patchwork for the years ended December 31, 2016 and 2017: During 2017, Patchwork had the following transactions: 1. On June
> The Cormier Corporation sells office equipment and supplies to many organizations in the city and surrounding area on contract terms of 2/10, n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 day
> In 2017, Ibran Corp. required additional cash for its business. Management decided to use accounts receivable to raise the additional cash and has asked you to determine the income statement effects of the following transactions: 1. On July 1, 2017, Ibra
> When Canadian public companies were required to apply IFRS beginning in 2011, one of the major issues faced by some entities, particularly those whose revenues were regulated by an independent body, concerned the accounting for regulatory assets. This is
> Dev Equipment Corp. usually closes its books on December 31, but at the end of 2017 it held its cash book open so that a more favourable statement of financial position could be prepared for credit purposes. Cash receipts and disbursements for the first
> Shanahan Construction Company has entered into a non-cancellable contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take three years to construct. The complex will be billed
> Air France-KLM Group and Air Canada are both global airline companies. Both companies report under IFRS. Access the financial statements of Air France-KLM for its year ended December 31, 2014, and Air Canada for the same period, from each company’s websi
> Howeven Inc. is a private company that expects to “go public” and become publicly traded soon. Accordingly, it expects to be adopting IFRS by 2017. It is a manufacturing company with extensive investments in property,
> Realtor Inc. is a company that owns five large office buildings that are leased out to tenants. Most of the leases are for 10 years or more with renewal clauses for an additional 5 years. Currently, Realtor Inc. is a private company that follows ASPE. Re
> Hale Hardware takes pride in being the “shop around the corner” that can compete with the big-box home improvement stores by providing good service from knowledgeable sales associates (many of whom are retired local handymen). Hale has developed the foll
> Tablet Tailors sells tablet PCs combined with Internet service (Tablet Bundle A) that permits the tablet to connect to the Internet anywhere (that is, set up a Wi-Fi hot spot). The price for the tablet and a four-year Internet connection service contract
> Martz Inc. has a customer loyalty program that rewards a customer with one customer loyalty point for every $100 of purchases. Each point is redeemable for a $3 discount on any future purchases. On July 2, 2017, customers purchase products for $300,000 (
> Lydia Trottier has prepared baked goods for sale since 1998. She started a baking business in her home and has been operating in a rented building with a storefront since 2003. Trottier incorporated the business as MLT Inc. on January 1, 2017, with an in
> Presented below are three independent revenue arrangements for Colbert Company. The company follows IFRS. Instructions: Respond to the requirements related to each revenue arrangement. (a) Colbert sells 3-D printer systems. Recently, Colbert provided a
> Nickel Strike Mines is a nickel mining company with mines in northern Ontario, Colombia, and Australia. It is a publicly traded company and follows IFRS, and has historically followed industry practice and used unit of production as its depreciation poli
> Van Hatten Consolidated has three operating divisions: DeMent Publishing Division, Ankiel Security Division, and Depp Advisory Division. Each division maintains its own accounting system but follows IFRS. DeMent Publishing Division The DeMent Publishing
> Economy Appliance Co. manufactures low-price, no-frills appliances that are in great demand for rental units. Pricing and cost information on Economy’s main products are as follows. Item………………………………..Stand-Alone Selling Price (Cost) Refrigerator……………………
> On January 1, 2017, 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, has the following transactions in January: 1. Paid $6,000 in advance f
> The following is from a recent income statement for Graben Inc. (a public company): Sales revenue…………………………………………$21,924,000,000 Costs and expenses…………………………………..20,773,000,000 Income from operations……………………………….1,151,000,000 Other income………………………………………
> The equity accounts of Good Karma Corp. as at January 1, 2017, were as follows: Retained earnings, January 1, 2017 ……………………………………………$257,600 Common shares …………………………………………………………………………600,000 Preferred shares………………………………………………………………………….250,000 Contribut
> Amos Corporation was incorporated and began business on January 1, 2017. It has been successful and now requires a bank loan for additional working capital to finance an expansion. The bank has requested an audited income statement for the year 2017 usin
> Faldo Corp. is a public company and has 100,000 common shares outstanding. In 2017, 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 201
> Joe Schreiner, controller for On Time Clock Company Inc., recently prepared the company’s income statement and statement of changes in equity for 2017. Schreiner believes that the statements are a fair presentation of the companyâ
> A comparative statement of financial position for Spencer Corporation follows: Additional information: 1. Net income for the fiscal year ending December 31, 2017, was $19,000. 2. In March 2017, a plot of land was purchased for future construction of a
> The statement of financial position of Manion Corporation follows (in thousands)L: Instructions: Evaluate the statement of financial position. Briefly describe the proper treatment of any item that you find incorrect. Assume the company follows IFRS.
> Two well-known company names in the transportation industry in Canada are Canadian National Railway Company and Canadian Pacifi c Railway Limited. Go to either SEDAR (www.sedar.com) or each company’s website to gain access to the financial statements of
> P6-1 BBQ Master Company sells total outdoor barbecue solutions, providing gas and charcoal barbecues, accessories, and installation services for custom patio barbecue stations. Instructions: Respond to the requirements related to the following independe
> The statement of financial position of Sargent Corporation follows for the current year, 2017: The following additional information is available: 1. The Current Assets section includes the following: cash $150,000; accounts receivable $170,000, less $1
> Jia Inc. applies ASPE and had the following statement of financial position at the end of operations for 2016: During 2017, the following occurred: 1. Jia Inc. sold some of its trademarks. The trademarks had an unlimited useful life and a cost of $10,0
> Aero Inc. had the following statement of financial position at the end of operations for 2016: During 2017, the following occurred: 1. Aero liquidated its FV-NI investments portfolio at a loss of $5,000. 2. A parcel of land was purchased for $38,000. 3
> In an examination of Garganta Limited as at December 31, 2017, you have learned about the following situations. No entries have been made in the accounting records for these items. 1. The corporation erected its present factory building in 2001. Deprecia
> The statement of financial position of Delacosta Corporation as at December 31, 2017, is as follows: Note 1: Goodwill in the amount of $70,000 was recognized because the company believed that the carrying amount of assets was not an accurate representa
> The trial balance of Eastwood Inc. and other related information for the year 2017 follows: Additional information: 1. The inventory has a net realizable value of $212,000. The FIFO method of inventory valuation is used. 2. The fair valueâ€&
> Statement of financial position items for Montoya Inc. follow for the current year, 2017: Instructions: (a) Prepare a classified statement of financial position in good form. The numbers of authorized shares are as follows: unlimited common and 20,000
> A list of accounts follows: Instructions: Prepare a classified statement of financial position in good form, without specific amounts. Accounts Receivable Pension Obligation, non-current Bonds Payable due in four years Prepaid Rent Buildings Purcha
> A combined single-step income and statement of retained earnings for California Tanning Salon Corp. follows for 2017 (amounts in thousands): Additional facts are as follows: 1. Selling, general, and administrative expenses for 2017 included a usual but
> Canadian Tire Corporation, Limited is one of Canada’s best-known retailers. Obtain a copy of Canadian Tire’s financial statements for the year ended January 3, 2015, through SEDAR (www.sedar.com) or on the company’s website. To answer the following quest
> The following account balances were included in the trial balance of Reid Corporation at June 30, 2017: During 2017, Reid incurred production salary and wage costs of $710,000, consumed raw materials and other production supplies of $474,670, and had a
> The following financial statement was prepared by employees of Intellisys Corporation: Note 1: New styles and rapidly changing consumer preferences resulted in a $37,000 loss on the disposal of discontinued styles and related accessories. Note 2: The c
> Hamza Khan, vice-president of finance for Dani Ipo Corp., has recently been asked to conduct a seminar for the company’s division controllers. He would discuss the proper accounting for items that are large but do not typify normal business transactions
> The trial balance follows for Thompson Corporation at December 31, 2017: A physical count of inventory on December 31 showed that there was $64,000 of inventory on hand. Instructions: Prepare a single-step income statement and a statement of retained
> Information for 2017 follows for Rolling Thunder Corp.: Retained earnings, January 1, 2017…………………………………………………………….$ 1,980,000 Sales revenue…………………………………………………………………………………………….36,500,000 Cost of goods sold……………………………………………………………………………………….28,500,000 Inte
> On November 1, 2016, Campbell Corporation management decided to discontinue operation of its Rocketeer 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
> Zephyr Corporation began operations on January 1, 2014. 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, 2017, follows. (As a private company, DC 5 has elected to follow ASPE.) Also presented are three unrelated situations involving accounting changes and the
> P4-1 In recent years, Grace Inc. has reported steadily increasing income. The company reported income of $20,000 in 2014, $25,000 in 2015, and $30,000 in 2016. Several market analysts have recommended that investors buy Grace Inc. shares because they exp
> Brookfield Asset Management Inc. is a global publicly traded Canadian company. Brookfield’s financial statements for its year ended December 31, 2014, are included at the end of this book. Instructions: Access Brookfield’s financial statements for the y
> The unadjusted trial balance of Clancy Inc. at December 31, 2017, is as follows: Additional information: 1. Actual advertising costs amounted to $1,500 per month. The company has already paid for advertisements in Montezuma Magazine for the first quart
> Fusters, Inc., provides audited financial statements to its creditors and is required to maintain certain covenants based on its debt to equity ratio and return on assets. In addition, management of Fusters receives a bonus partially based on revenues fo
> The following information relates to Joachim Anderson, Realtor, at the close of the fiscal year ending December 31: 1. Joachim paid the local newspaper $335 for an advertisement to be run in January of the next year, and charged it to Advertising Expense
> The trial balance and other information for consulting engineers Mustang Rovers Consulting Limited follow: Additional information: 1. Service revenue includes fees received in advance from clients of $6,900. 2. Services performed for clients that wer
> You are hired to review the accounting records of Sheridan Inc. (a public corporation) before it closes its revenue and expense accounts as at December 31, 2017, the end of its current fiscal year. The following information comes to your attention. 1. Du
> Second-Hand Almost New Department Store Inc. is located near a shopping mall. At the end of the company’s fiscal year on December 31, 2017, the following accounts appeared in two of its trial balances: Analysis reveals the following a
> Transactions from Gravenhurst Inc.’s current year follow. Gravenhurst follows IFRS. 1. Gravenhurst Inc. thinks it should dispose of its excess land. While the carrying value is $50,000, current market prices are depressed and only $25,000 is expected upo
> Mason Advertising Agency Inc. was founded in January 2013. Presented below are adjusted and unadjusted trial balances as at December 31, 2017. Instructions: (a) Journalize the annual adjusting entries that were made. (Omit explanations.) (b) Prepare an
> The trial balance of Slum Dog Fashion Centre Inc. contained the following accounts at November 30, the company’s fiscal year end: Adjustment data: 1. Store supplies on hand totalled $3,100. 2. Depreciation is $40,000 on the store equi
> Below are the completed financial statement columns of the work sheet for Canned Heat Limited: Instructions: (a) Prepare a statement of comprehensive income, statement of changes in equity, and statement of financial position. During 2017, Canned Heat&
> Gomi Medical Labs Inc. began operations five years ago producing a new type of instrument it hoped to sell to doctors, dentists, and hospitals. The demand for the new instrument was much higher than had been planned for, and the company was unable to pro
> Instructions: From the SEDAR website (www.sedar.com) choose one company from each of four different industry classifications. Choose from a variety of industries, such as real estate (e.g., Crombie Real Estate Investment Trust), food stores— merchandisin
> The following transactions fall somewhere in continuum of choices in accounting decision-making. 1. The company president approaches one of the company’s creditors to ask for a modification of the repayment terms so that they extend beyond the current ye
> Samuels Corp. began operations on January 1, 2017. Its fiscal year end is December 31. Samuels has decided that prepaid costs are debited to an asset account when paid, and all revenues are credited to revenue when the cash is received. During 2017, the
> Mona Kamaka, CPA, was retained by Downtown TV Repair Ltd. to prepare financial statements for the month of March 2017. Mona accumulated all the ledger balances from the business records and found the following: Mona reviewed the records and found the f
> Kitchigami Limited was attracted to the Town of Mornington by the town’s municipal industry commission. Mornington donated a plant site to Kitchigami, and the provincial government provided $180,000 toward the cost of the new manufacturing facility. The
> Munro Limited reports the following information in its tax fi les covering the five-year period from 2015 to 2019. All assets are Class 10 with a 30% maximum CCA, and no capital assets had been acquired before 2015. Instructions: (a) Prepare a capital
> Consider the following independent situations. Situation 1: Ducharme Corporation purchased electrical equipment at a cost of $12,400 on June 2, 2014. From 2014 through 2017, the equipment was depreciated on a straight-line basis, under the assumption tha
> Sung Corporation, a manufacturer of steel products, began operations on October 1, 2016. Sung’s accounting department has begun to prepare the capital asset and depreciation schedule that follows. You have been asked to assist in comple
> The following is a schedule of property dispositions for Shangari Corp.: The following additional information is available: Land On February 15, land that was being held mainly as an investment was expropriated by the city. On March 31, another parcel
> The president of Plain Corp., Joyce Lima, is thinking of purchasing Balloon Bunch Corporation. She thinks that the offer sounds fair but she wants to consult a professional accountant to be sure. Balloon Bunch Corporation is asking for $85,000 in excess
> Macho Inc. has recently become interested in acquiring a South American plant to handle many of its production functions in that market. One possible candidate is De Fuentes SA, a closely held corporation, whose owners have decided to sell their business
> Hotel Resort Limited is a company that builds world-class resorts in tourist areas around the globe. When the company decided to build a resort in Yellowknife, the federal government agreed to provide a forgivable loan in the amount of $50 million to hel
> On September 1, 2017, Madonna Lisa Corporation, a public company, acquired Jaromil Enterprises for a cash payment of $763,000. At the time of purchase, Jaromil’s statement of financial position showed assets of $850,000, liabilities of $430,000, and owne
> In late July 2017, Mona Ltd., a private company, paid $2 million to acquire all of the net assets of Lubello Corp., which then became a division of Mona. Lubello reported the following statement of financial position at the time of acquisition: It was
> Six examples of purchased intangible assets follow. They are reported on the consolidated statement of financial position of Powers Enterprises Limited and include information about their useful and legal lives. Powers prepares financial statements in ac
> Use the data provided in P12-8. Assume instead that Meridan Golf and Sports is a public company. The relevant information for the impairment test on December 31, 2019, is as follows: Instructions: Provide the calculations for the impairment test and an
> Meridan Golf and Sports was formed on July 1, 2017, when Steve Power driver purchased Old Master Golf Corporation. Old Master provides video golf instruction at kiosks in shopping malls. Power driver’s plan is to make the instruction bu
> In 2017, Aquaculture Incorporated applied for several commercial fishing licences for its commercial fishing vessels. The application was successful and on January 2, 2017, Aquaculture was granted 22 commercial fishing licences for a registration fee of
> During 2015, Medicine Hat Tools Ltd., a Canadian public company, purchased a building site for its product development laboratory at a cost of $61,000. Construction of the building started in 2015. The building was completed in late December 2016 at a co
> Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products
> Monsecours Corp., a public company incorporated on June 28, 2016, set up a single account for all of its intangible assets. The following summary discloses the debit entries that were recorded during 2016 and 2017 in that account: The new business star
> Gelato Corporation, a private entity reporting under ASPE, was incorporated on January 3, 2016. The corporation’s financial statements for its first year of operations were not examined by a public accountant. You have been engaged to a
> A machine’s invoice price is $40,000. Various other costs relating to the acquisition and installation of the machine—including transportation, electrical wiring, a special base, and so on—amount to $7,500. The machine has an estimated life of 10 years,
> Information for Naples Corporation’s intangible assets follows: 1. On January 1, 2017, Naples signed an agreement to operate as a franchisee of Copy Service, Inc., for an initial franchise fee of $75,000. Of this amount, $35,000 was paid when the agreeme
> Guiglano Inc. is a large, publicly held corporation. The following are six selected expenditures that were made by the company during the fiscal year ended April 30, 2017. The proper accounting treatment of these transactions must be determined in order
> The records of Sudbury Menswear report the following data for the month of September: Instructions: (a) Estimate the ending inventory using the conventional retail inventory method. (b) Assuming that a physical count of the inventory determined that th
> In early January 2017, 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, 2017, 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 2017, Sonja reporte
> The following are two independent situations. Situation 1: Lauren Inc. received dividends from its common share investments during the year ended December 31, 2017, as follows: • A cash dividend of $12,250 is received from Peel Corporation. Lauren owns a
> On January 1, 2017, 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, 2016. 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
> Fox Ltd. invested $1 million in Gloven Corp. early in the current year, receiving 25% of its outstanding shares. At the time of the purchase, Gloven Corp. had a carrying amount of $3.2 million. Gloven Corp. pays out 35% of its net income in dividends eac
> Holmes, Inc. purchased 30% of Nadal Corporation’s 30,000 outstanding common shares at a cost of $15 per share on January 3, 2017. The purchase price of $15 per share was based solely on the book value of Nadal’s net assets. On September 21, Nadal declare
> Access the financial statements of BHP Billiton plc for the company’s year ended June 30, 2014. Also access the financial statements of Newfield Exploration Company for the company’s year ended December 31, 2014. These are available at the companies’ web
