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 slow sales volume during December, a toy store has an unexpectedly large inventory.
2. One of Sukkor Corporation’s major clients has gone into creditor protection. The client accounts for 40% of Sukkor’s outstanding accounts receivable. Sukkor has filed a court claim against the client (along with other unsecured creditors), but a loss of somewhere between 20% and 35% of the receivable is likely.
3. IMF Inc. has been sued by another company for trademark infringement. The other com-pany has won a lower- court judgement against IMF for $ 1.5 million. IMF is appealing the decision to a higher court. IMF’s lawyers are confident that IMF will win the appeal.
4. CanBuild Ltd. signed a fixed- price contract for construction of a 45- storey condominium apartment building in downtown Calgary. Construction has been underway for almost a full year, and about 60% of the estimated total costs have been incurred so far. Construction costs have been rising rapidly in Calgary. Now, however, condominium sales have stalled due to a recession.
5. Pacific Alliance has just finished producing a new children’s computer- animated motion picture for DVD distribution. The total accumulated production cost is $ 3.4 million. Pacific Alliance has signed a distribution agreement with a major supplier of educational materials, including DVDs. Normally, Pacific Alliance’s earlier movies of the same general type have a sales life of about three years— slow to start, then increasing acceptance, followed by market saturation and obsolescence.

  • CreatedFebruary 17, 2015
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