Questions and Answers of Accounting Principles Volume 2

The adjusted trial balance for Sykes Ltd. at October 31, 2024, contained the following: Accounts payable .......................................................... $ 57,000 Income
On January 1, 2024, Wolstenholme Corp. borrows $18,000 by signing a 3-year, 7% note payable. The note is repayable in three annual blended payments of $6,859 on December 31 of each
Three different lease transactions are presented below for Manitoba Enterprises. Assume that all lease transactions start on January 1, 2024. Manitoba does not receive title to the properties, either
Presented below are three different lease transactions that occurred for Klippert Inc., a private company that prepares its financial statements using ASPE. Assume that all lease contracts start on
On January 1, 2024, Chilton Ltd. issued $500,000 of 5%, 5-year bonds. The bonds were issued to yield a market interest rate of 6%. Chilton’s year end is December 31. On January 1, 2026, immediately
Elite Electronics issues a $450,000, 10-year, 7.5% mortgage note payable on December 31, 2024. The terms of the note provide for semi-annual fixed principal payments of $22,500, plus interest, on
Kinyae Electronics issues a $600,000, 10-year, 9% mortgage note payable on December 31, 2024, to help finance a plant expansion. The terms of the note provide for semi-annual blended payments of
Western Inc. issues $800,000 of 5-year, 6% bonds on January 1, 2024. The bonds pay interest annually. Instructions a. Calculate the issue price of the bonds using a market rate of 5% and
Elsworth Ltd. issued $1 million of 5-year, 4% bonds dated May 1, 2024, for $1,046,110 when the market interest rate was 3%. Interest is paid semi-annually on May 1 and November 1. Prepare an
Villa Corporation issued $3 million of 7-year, 4% bonds dated January 1, 2024, for $2,661,118. The market interest rate when the bonds were issued was 6%. Interest is payable semi-annually on January
The following instalment payment schedule is for an instalment note payable: Instructionsa. Is this a fixed principal or blended payment schedule?b. What is the interest rate on the note?c.
Two independent situations follow: 1. Longbine Corporation redeemed $130,000 face value, 12% bonds on June 30, 2024, at 102. The bonds’ carrying amount at the redemption date was $117,500. The
The following instalment payment schedule is for an instalment note payable: Instructionsa. Is this a fixed principal or blended payment schedule?b. What is the interest rate on the note?c. What
Pavlina borrowed $15,000 from the bank and signed a 3-year, 6% instalment note payable with fixed annual principal payments. She wants to know how to calculate what the annual fixed principal payment
The balance sheet for Miley Corporation reports the following information on July 1, 2024.Non-current liabilities Bonds payable, 4%, due 2027 .........................................
Cove Resort Corp. issued a 20-year, 7%, $240,000 mortgage note payable to finance the construction of a new building on December 31, 2024. The terms provide for semi-annual instalment payments on
The adjusted trial balance for Carey Corporation at December 31, 2024, contained Accounts payable ..................................................................$ 76,000 Interest expense
Prater Corporation issued $400,000 of 10-year bonds at a discount. Prior to maturity, when the bonds’ carrying amount was $390,000, the company redeemed the bonds at 97. Prepare the entry to record
The following instalment payment schedule is for an instalment note payable: a. What current and non-current amounts, related to the note, should be presented on the balance sheet at December
You qualify for a $10,000 loan from the Canada Student Loans Program to help finance your education. Once you graduate, you start repaying this note payable at an interest rate of 4.8%. The monthly
On November 30, 2024, Eyre Inc. financed the purchase of a building by signing a $360,000, 10-year, 6% mortgage note payable. The terms provide for monthly instalment payments. Prepare the
Lally Co. issues a $500,000, 25-year, 3% note payable on April 30, 2024, for cash. The terms provide for monthly instalment payments. Prepare the journal entries to record the mortgage loan on April
On January 1, 2024, Jarvis Corp. borrows $8,400 by signing a 3-year, 3% note payable. The note is repayable in three annual fixed principal payments on December 31 of each year.Instructionsa.
Elbow Lake Corp. issues a $600,000, 4-year, 4% note payable on March 31, 2024. The terms provide for fixed principal payments annually of $150,000. a. Prepare the journal entries to record the
Norman Corporation reports under IFRS and has a December year end. Norman leases equipment on January 3, 2024. It agrees to make annual lease payments of $17,500 over five years at an interest rate
Prepare the journal entries that the lessee should make to record the following transactions assuming the entities report under ASPE. a. The lessee makes a lease payment of $80,000 to the lessor
Two independent situations follow: 1. Ready Car Rental leased a car to Dumfries Company for three months. Terms of the lease agreement call for monthly payments of $750, beginning on May 21,
Pierre Paquin leases office space for $3,000 per month from Privateer Commercial Realty Ltd. for a short period of time. The lease agreement is for six months. Prepare the journal entry to record the
Chang Corp. leases new manufacturing equipment from Bracer Construction Inc. The present value of the lease payments is $300,000 and the fair value of the equipment is $320,000. Both companies
Plankton Corporation’s trial balance at December 31, 2024, is presented below: All transactions and adjustments for 2024 have been recorded and reported in the trial balance except for the
The adjusted trial balance for Ray Corporation at July 31, 2024, the corporation’s fiscal year end, contained the following: Accounts payable
Selected liability items for Waugh Corporation at December 31, 2024, follow. Prepare the liabilities section of Waugh’s balance sheet. Accounts payable
AN Empire Company Limited reported the following selected year-end data at May 2, 2020 (in CDN$ millions): Total assets ......................................................................
Lannan Corp. had the following debt instrument transactions during the year ended December 31, 2024. The debt instruments were purchased to earn interest. Feb. 1 Purchased six-month term deposit
Liu Corporation had the following transactions in debt instruments purchased to earn interest during the year ended December 31, 2024: Jan. 1 Purchased a 180-day (six-month) Government of Canada
The Canada Life Assurance Company provides insurance, wealth management, and health care benefits in Canada. Access the 2020 annual report for The Canada Life Assurance Company from the company’s
The following terms were introduced in this chapter: 1. Strategic investments 2. Non-strategic investments 3. Investments at fair value through profit or loss (FVTPL) 4.
On July 1, 2024, Givarz Corporation, a public company, purchased $300,000 of Schuett Corp. 10-year, 3% bonds at 91.8 when the market rate of interest was 4%. Interest is received semi-annually on
Kroshka Holdings Corporation has several investments in the debt and equity securities of other companies: 1. 10-year BCE bonds, purchased to earn interest. 2. 10-year GE bonds, intended to
On January 1, 2024, Morrison Inc., a public company, purchased $600,000 of Pearl Corporation’s five-year, 4% bonds for $627,660 when the market interest rate was 3%. Interest is received
Royal Bank of Canada is one of the largest banks in Canada. According to its 2020 annual report, it had more than 86,000 employees serving 17 million customers throughout the world. The bank’s
For each of the following investments, identify the (a) Reason for the investment (non-strategic or strategic) (b) Balance sheet classification (current or non-current asset) (c)
What are the differences between non-strategic and strategic investments?
Under International Financial Reporting Standards, investments in debt instruments are reported at either amortized cost or fair value through profit or loss. The president of Lunn Financial
On January 1, 2024, Surge Ltd. issued bonds with a maturity value of $6 million at 104 when the market rate of interest was 4.5%. The bonds have a contractual interest rate of 5% and mature on
Stevens Corporation, during the year ended October 31, 2024, had the following transactions for money-market instruments purchased to earn interest: Jan. 2 Purchased a 120-day, $40,000 treasury
On November 15, 2024, Uram Mining Ltd. announced that it will be purchasing a 32% share in the newly incorporated White Shell Supplies Company. Uram Mining Ltd. owns and operates a mining operation
On December 2, 2024, Nudesign Furniture Ltd. purchased a $150,000, Canadian government 120-day treasury bill for $148,900. On December 31, $275 of interest had accrued on the treasury bill. On April
On January 1, 2024, Power Ltd. issued bonds with a maturity value of $5 million for $4,797,000, when the market rate of interest was 8%. The bonds have a contractual interest rate of 7% and mature on
On April 1, 2024, Bight Corporation issued $400,000, five-year bonds. On this date, Shoreline Corporation purchased the bonds from Bight to earn interest. Interest is received semi-annually on April
During the year ended December 31, 2024, Mead Investment Corporation, a public company, had the following transactions related to investments held for trading: Feb. 1 Purchased 2,400 Lemelin
During 2023, Commercial Inc., a public company, purchased equity securities held for trading purposes. At December 31, 2023, the securities for Commercial Inc. were as follows: The following
On July 1, 2024, Imperial Inc., a public company, purchased $500,000 of Acme Corp. 10-year, 4% bonds for $461,000 to earn interest. The bonds had a market interest rate of 5%. The bonds pay interest
During the year ended December 31, 2024, Rakai Corporation, a public company, had the following transactions related to investments held for trading purposes: Feb. 1 Purchased 575 IBF common
During 2023, Financial Holdings, a public company, purchased equity securities for trading purposes. At December 31, 2023, the securities for Financial Holdings were as follows: The following
On January 1, 2024, Chan Ltd., a public company, purchased $600,000 of five-year, 4% bonds at par from Pullen Corporation. Interest is received semi-annually on July 1 and January 1. Chan purchased
As indicated in the “All About You” feature in this chapter, any Canadian aged 18 or older can save up to $6,000 every year in a tax-free savings account (TFSA). TFSA savings can be used for any
It is now the end of January 2026 and Santé Smoothies & Sweets Ltd. has been so successful, it has excess cash and would like to invest it. The Koebels also wish to expand their operation by
Strand Corp. purchased $300,000 of five-year, 4% Hydrocor bonds at 99 on June 30, 2024. Strand Corp. purchased the bonds to earn interest. Interest is paid semi-annually each June 30 and December 31.
The following transactions relate to Portland Cement Ltd.’s investment in the debt securities of Widget Makers Inc. during 2024 and 2025. Portland is a public company and purchased the investment
On July 1, 2024, Moon Corporation, a private company, purchased $400,000 of sixyear, 6% Star Corporation bonds for $420,000. The bonds pay interest each June 30. The bonds were purchased to earn
On January 2, 2024, Hadley Inc., which reports under IFRS, purchased shares of Letourneau Corp. for $10 a share. Hadley intends to hold these shares as a long-term investment. During 2024, Letourneau
On August 1, 2024, Chen Corporation, a public company, purchased $100,000 of Alaska Ltd. five-year, 7% bonds at par. The bonds were purchased for trading purposes and pay interest semi-annually on
Under what circumstances would an investor record a gain on the sale of a bond investment? When would a loss on the sale of a bond investment be recorded?
On April 1, 2024, Perfect Plastics Company purchased 40,000 common shares in Ecotown Ltd. for $15 per share. Management has designated the investment as FVTOCI. On December 5, Ecotown paid dividends
Sandhu Ltd. has 400,000 common shares authorized and 120,000 shares issued on December 31, 2023. On January 2, 2024, Kang Inc., which reports under IFRS, purchased shares of Sandhu for $40 per share
Using the data presented in BE16.5, assume Strand Corp. is a public company and that it purchased Hydrocor’s bonds at par for trading purposes. Prepare the journal entries to record (a) The
On March 1, 2024, Carnegie Inc., a public company, purchased 15% of the common shares of Aquinas Auto Inc. for $225,000. The remaining shares (85%) are widely dispersed. Carnegie Inc. considers this
Following is information for Marcel Ltée’s investments held for trading. Marcel is a public company and has a December 31 year end. 2024 Sept. 28 Purchased 3,500 shares of Cygman Limited
What are the differences between the fair value through profit or loss and fair value through other comprehensive income investment classifications?
On January 1, 2024, Neitzche Company, a public company, purchased 35% of the common shares of Triple Titanium Inc. for $525,000. The remaining shares (65%) are held by the family members of the
On August 1, McLain Finance Inc. buys 3,000 Datawave common shares for trading purposes for $114,000 cash. On October 15, McLain receives a cash dividend of $2.75 per share from Datawave. On December
Selected condensed information (in millions) for Investments R Us Company, a public company, follows for the year ended November 30, 2024. Income from investment in associate
The following was reported by Church Financial in its December 31, 2024, financial statements: Investments at FVTPL, December 31, 2023.................................. $11,000 Investments
Silver Lining Corporation, a public company, is a large silver producer. Selected condensed information (in millions) for Silver Lining Corporation follows for the year ended September 30, 2024:Cost
Presented in alphabetical order, the following data are from the accounting records of Vladimir Corporation at December 31, 2024:Accounts payable
Using the data presented in BE16.9, assume that the investment in Ecotown’s common shares is sold on January 15, 2025, for $690,000. Prepare the journal entry to record the sale of the
Visage Cosmetics, a public company, acquires 40% of Image Fashion Inc.’s 30,000 common shares for $18 per share on January 2, 2024. On June 15, Image Fashion pays a cash dividend of $30,000. On
On January 1, 2024, Studio27 Ltd., a private company, buys 25% of Sugar Maple Candy Company’s 200,000 common shares for $480,000. On December 31, 2024, Sugar Maple pays a $35,000 cash dividend and
On January 1, 2024, McAdam Ltd., a private company reporting under ASPE, purchased 25% of the common shares of Tomecek Corporation for $175,000. Tomecek reported profit of $85,000 for 2024 and paid
You are provided with the following balance sheet accounts of New Bay Inc., a public company, as at December 31, 2024: Accounts payable
Wren Inc., a public company, owns 20% of Dong Ltd.’s common shares for strategic purposes. The investment’s carrying amount at January 1, 2024, is $300,000. During the year, Dong reported profit
Atwater Corporation, a public corporation, reported a holding gain of $46,000 net of tax on an investment reported at fair value through other comprehensive income, and a holding loss of $50,000
You are provided with the following income accounts of Oakridge Ltd. for the year ended December 31, 2024. Oakridge reported profit from operations of $125,000 for the year ended December 31, 2024.
Refer to question #13. After you explain the appropriate accounting to the student, she comes to you with questions. She is confused about the equity method. Explain how the equity method of
Indicate on which financial statement (balance sheet, income statement, or statement of comprehensive income) each of the following accounts would be reported if the investor is a public company.
Identify what is included in the carrying amount of a strategic investment using the(a) Equity method(b) Cost method.
Sabre Corporation, a public company, has the following investments at November 30, 2024: 1. Investments held for trading purposes: common shares of National Bank, carrying amount $25,000, fair
In the chapter, we discussed five types of investments. Describe each type and include the measurement method used for both IFRS and ASPE.
Identify the proper statement presentation of the following investments: (a) Investments held for trading purposes (b) Short term debt investments purchased to earn interest (c) Debt
When may a company report holding gains or losses on fair value adjustments through other comprehensive income? Why might a company choose to report these gains and losses in other comprehensive
In the “All About You” feature, we learned about some successful partnerships. The Beatles and the Rolling Stones were popular music bands that started in the early 1960s. However, the Beatles
Hyperchip Limited is a private corporation reporting under ASPE. At December 31, 2024, its general ledger contained the following summary data: Cost of goods sold
Beauce Incorporated had 45,000, $2.50 preferred shares issued. It did not pay a dividend to the preferred shareholders in 2023 and 2024. (a) What are the dividends in arrears, if any, at
Zurich Limited is a private corporation reporting under ASPE. At December 31, 2024, its general ledger contained the following summary data: Cost of goods sold
Highland Corporation, a private corporation, was organized on January 1, 2024. It is authorized to issue 50,000, $3 noncumulative preferred shares, and an unlimited number of common shares. The
Triple A Accountants is a partnership with three partners. On February 29, 2024, the three partners, M. Kumar, H. Deol, and A. Kassam, have capital balances of $85,000, $72,000, and $43,000,
Tango Treasures Company sells home furnishings. On February 1, Tango Treasures entered into a contract with Simon Development Ltd. for home furnishings with a selling price of $40,000 and terms of
All Care Inc. reported the following selected information for the past three years (in millions, except for per share amounts): Instructions a. Calculate All Care’s return on equity,
If all other factors stay the same, indicate whether each of the following is generally considered favorable or unfavorable by a potential investor: (a) A decrease in return on equity(b) An

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