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business
fundamental accounting principles

Questions and Answers of Fundamental Accounting Principles

Express the following income statement information in common-size percentages and assess whether the situation is favourable or unfavourable. Waterford Corporation Income Statement For Years Ended
In what ways is the direct method different from the indirect method?a. The direct method cash flow statement begins with profit and adjusts cash flow for accrualsb. The direct method cash flow
The indirect method calculates net cash inflows by adjusting which of the following:a. Revenues and expensesb. Accrual basis to cash basisc. Operating activitiesd. Investing activities
Calculate trend percentages for the following items using 2016 as the base year. Then, state whether the situation shown by the trends appears to be favourable or unfavourable. 2020 2018 2017 2019
Examples of non-cash investing and financing activities that do not impact the statement of cash flows but must be disclosed include all of the following except:a. Retirement of debt by issuing
All of the following activities represent cash inflows for the financing activities section of the statement of cash flows except:a. Cash received from issuing its own sharesb. Repayment of cash
Where possible, calculate percentage of increase and decrease for the following accounts of Craft Brewery Ltd.: 2020 2019 Current non-strategic investments Accounts receivable. Notes payable.
In the chapter-opening vignette, it was mentioned that Roots Canada had a significant increase in year over year EPS for 2017. Why should investors be evaluating profitability ratios such as EPS and
Refer to the financial statements in Appendix II for Spin Master and calculate the percentage change in noncurrent liabilities from December 31, 2016 to December 31, 2017.
All of the following activities should be included in the investing activities section of the statement of cash flows except:a. Paying dividends to shareholdersb. Lending and collecting on loans
Refer to the financial statements in Appendix II for Spin Master and calculate the percentage change in revenue from December 31, 2016, to December 31, 2017.
All of the following represent examples of operating cash flows except for payments to:a. Employees for salaries and wagesb. Suppliers for goods and servicesc. Purchase equipmentd. Lenders for
Refer to the financial statements in Appendix II for WestJet and calculate the percentage change in sales and marketing expenses from 2016 to 2017.
Refer to the financial statements in Appendix II for WestJet and calculate the percentage change in total revenues from 2016 to 2017.
Which two terms are used to describe the difference between current assets and current liabilities?
Which of the following ratios enables investors to evaluate profitability?a. Quick ratiob. A/R turnoverc. Return on shareholders’ equityd. Price–earnings ratio
Calculate A/P turnover for Bloom Greenhouses for the December 31, 2020 year-end.a. 0.75 timesb. 1.33 timesc. 2.0 timesd. 2.78 timesUse the following financial information to answer question.Bloom
Calculate A/R turnover for Bloom Greenhouses for the December 31, 2020 year-end.a. 2.78 timesb. 0.36 timesc. 1.67 timesd. 4.16 timesUse the following financial information to answer question.Bloom
Calculate A/R turnover for Bloom Greenhouses for the December 31, 2020 year-end.a. 2.78 timesb. 0.36 timesc. 1.67 timesd. 4.16 timesUse the following financial information to answer question.Bloom
Which of the following ratios provides information on a company’s ability to meet short-term cash requirements?a. Debt to equity ratiob. Gross profit ratioc. Current ratiod. Return on equity
Which of the following methods of analysis enables users to reveal patterns in successive periods?a. Vertical analysisb. Trend analysisc. Horizontal analysisd. B and C only
Which of the following issues signal a potential concern when analyzing financial statements?a. Large dollar value and percentage year-over-year changesb. Unusual line itemsc. Unexpected
Horizontal analysis is a beneficial method of evaluating corporate performance because:a. It compares financial statement line items to a base amountb. It helps to determine key relationships between
Standards we can use to compare corporate financial performance include:a. Intracompanyb. Competitorc. Industry and guidelinesd. All of the above.
What are the four key building blocks of financial statement analysis?a. Liquidity and efficiency, solvency, profitability, and marketb. Liquidity and efficiency, solvency, profitability, and
Swiss Farm Inc.?s 2020 statement of cash flows appeared as follows: Swiss Farm Inc.?s balance sheet information is as follows: An examination of the company?s statements and accounts showed: a.
Burrow Mining Inc.?s comparative balance sheet information at December 31, 2020 and 2019, and its income statement for the year ended December 31, 2020, are as follows: During 2020, the following
Instant Brake Inc.?s comparative balance sheet information at December 31, 2020 and 2019, and its income statement for the year ended December 31, 2020, are as follows: During 2020, the following
The account balances for the non-cash current assets and current liabilities of Kid-game Software Inc. are as follows: During 2020, Kid-game Software Inc. reported depreciation expense of $57,000.
Part 1RequiredRefer to WestJet’s statement of cash flows in Appendix II at the end of the textbook and answer the following questions.a. Identify WestJet’s largest cash outflow during 2017.b.
To qualify as cash or a cash equivalent to be included in the statement of cash flows outlining the difference between beginning and ending balances of cash, an item must meet which of the following
The data below refer to Money Ltd. for the year ended December 31, 2020.RequiredFor each item, identify both the dollar amount and its classification—that is, whether it would appear as a positive
Refer to the information in Problem 16-1B. Prepare a statement of cash flows for 2020 using the direct method to report cash inflows and outflows from operating activities.Other information:a. All
Refer to the information in Problem 16-1A. Other information regarding LAG Network Inc.:a. All sales are credit sales.b. All credits to accounts receivable are receipts from customers.c. All
A major shareholder of Systems Unlimited Inc., Phil Wang, is perplexed. The 2020 income statement showed a healthy profit of $280 thousand. Yet, when Linda Lewis, the bank manager and a friend of
Wong Corporation began operations on January 1, 2019. Its adjusted trial balance at December 31, 2019 and 2020, is shown below along with some other information. Other information regarding Wong
Jacobson Manufacturing Corporation earned $84,000 in profit during 2020. Machinery was sold for $116,000 and a $24,000 loss on the sale was recorded. Machinery purchases totalled $330,000 including a
MED Supplies Inc., a software retailer, recently completed its 2020 operations. The following information is available: Additional information regarding MED Supplies Inc.?s activities during
LAG Network Inc.?s balance sheet and income statement are as follows: Additional information regarding LAG Network Inc.?s activities during 2020: a. Equipment is purchased for $14,400 cash. b.
On January 2, 2020, Bella Software Corp. paid cash of $1,200,000 to acquire 704,000 of Domino Inc.’s 3,200,000 outstanding common shares. Assume that Bella has significant influence over Domino as
Startup companies such as the Farmery, highlighted in the chapter-opening vignette, often have challenges raising sufficient capital. From the issuing company perspective, what are the advantages and
On January 2, 2020, Nassau Travel Corp. paid $500,000 cash to acquire 10,000 of Suffolk Corporation’s 40,000 outstanding common shares. Assume that Nassau has significant influence over Suffolk as
Investments in subsidiaries involves determining control over the investee corporation and requires which of the following accounting treatments:a. Shares are recorded at fair value at the end of
Refer to the information in QS 15-9. Show how the investment will be presented on the December 31, 2020, balance sheet, assuming the carrying value reflected the fair value.QS 15-9 Cash Perlod
Using the equity method, dividends received are not recorded as profit. Explain why this is true.
The equity method of accounting for investment in associates involves which of the following:a. Shares are recorded at fair value at the end of each reporting periodb. Investment is presented by
You have been asked by the VP of Finance to explain the appropriate accounting treatment for the following series of investments made by Metaphor Investments Inc.:• Purchased 50,000 of the 80,000
On January 1, 2020, Nickle Entertainment Inc. purchased a 4%, $50,000 Imax bond for $46,490. Interest is to be paid semiannually each June 30 and December 31. Nickle Inc. is planning to hold the bond
When share investments are accounted for using the equity method, when should investment income be recognized? What accounts are debited and credited?
Interest payments received on a bond held with the business objective of actively trading should be recorded as:a. Dr. Cash XXXCr. Interest Income XXXCr. Interest Receivable XXXb. Dr. Interest Income
The following events are for King Investment Inc.: Required Prepare general journal entries to record each transaction. Round per share calculations to two decimal places. 2020 Purchased 187,600
On January 1, 2020, Gordon Activewear purchased a 12%, $40,000 Telus bond with a three-year term for $42,030. Interest is to be paid semiannually each June 30 and December 31. Gordon is planning to
A bond held with the business objective to actively trade should be accounted for using which of the following methods:a. Amortized cost methodb. FV through profit and loss methodc. FV through OCId.
The following events are for Toronto Investment Inc.: Required Prepare general journal entries to record each transaction. Round per share calculations to two decimal places. 2020 Jan. Purchased
On February 1, 2020, Snappy Printing Inc. purchased 4% Telus bonds with a face value of $5,000 at 98 as a non-strategic investment. Interest is paid quarterly beginning May 1, 2020. The bonds mature
Shares held with the intent to generate profit through short-term changes in value are to be accounted for using which of the following methods:a. Amortized cost methodb. FV through profit and loss
Heritage Ltd. was organized on January 2, 2020. The following investment transactions and events occurred during the following months: Assume that Heritage has a significant influence over Port
Monkey Mortgage Inc. engaged in the following non-strategic investment transactions during 2020: Required 1. Prepare an amortization schedule for the Jaguar bond showing only 2020 and 2021. 2.
When non-strategic debt investments are accounted for using the amortized cost method, when should interest income be recognized?
When non-strategic investments are accounted for using the fair value method, when should investment income be recognized?
Wind Industries had selected unadjusted balances as shown below at year-end. A search on the Internet showed fair values on December 31, 2020, of CashCo, $18; Wells, $0.70. Prepare the appropriate
Financial statement users are concerned with the statement of cash flows for which of the following reasons:a. It helps users evaluate liquidity and ability to generate resources to repay
A bond held with the objective of collecting principal and interest payments over the life of the bond should be accounted for using which of the following methods:a. Amortized cost methodb. FV
Canadian Tire, a major Canadian retailer, reported the following in its December 30, 2017, financial statements:Dec. 30, 2017Current investments
On January 1, 2020, Holiday Resorts Ltd. purchased 30% of Chapman Ltd.?s outstanding common shares. The balance in Holiday Ltd.?s Investment in Associate Chapman Ltd. account was $500,000 as of
Huang Hardware Inc. had the following transactions involving non-strategic investments during 2020: Required 1. Prepare an amortization schedule for the Barker bond showing only 2020 and 2021. 2.
On January 1, 2020, the $1,000,000 par value bonds of Sinclair Corporation with a carrying value of $950,000 are converted to 500,000 common shares. Journalize the conversion of the bonds.
Tahoe Tent Ltd. issued bonds with a par value of $800,000 on January 1, 2020. The annual contract rate on the bonds was 12%, and the interest is paid semiannually. The bonds mature after three
On July 1, 2020, Lester Shoes Ltd. exercises a $4,000 call option on its outstanding bonds, which have a carrying value of $206,000 and par value of $200,000. Lester exercises the call option
Refer to the amortization schedule prepared in Problem 14-3B. Assume a January 31 year-end.RequiredPart 1Record the following entries:a. Issuance of the bonds on September 1, 2020b. Adjusting entry
Information taken from Nanotec Security Inc.’s January 31, 2020, balance sheet follows:Common shares, 400,000 shares authorized,32,000 shares issued and outstanding ...............................
Arcus Development Inc.’s equity section on the December 31, 2019, balance sheet showed the following information:Common shares, unlimited shares authorized,210,000 shares issued and outstanding
River Outdoor Supply Corporation (River Corp.) was organized on January 2, 2020. River Corp. issued 50,000 common shares for $250,000 on that date. The following investment transactions and events
Irving Inc.?s non-strategic investment portfolio at December 31, 2019, consisted of the following: Irving Inc. had no other debt and equity investments at December 31, 2019, other than those shown
Johnson Inc.?s non-strategic investment portfolio at December 31, 2019, consisted of the following: Johnson had no other debt and equity investments at December 31, 2019, other than those shown
Following are the non-strategic investment transactions of Corona Inc.: Required 1. For each of the bond investments, prepare an amortization schedule showing only 2020 and 2021. 2. Prepare the
A business combination is required when which of the following conditions are met:a. 20% or more of the shares are heldb. 40% of the shares are held by multiple ownersc. 60% of the shares are held by
On April 1, 2020, Joe Lite Corporation paid $851,560 to acquire bonds of Santos Electric Inc. with a par value of $860,000. The annual contract rate on the bonds is 6.5% and interest is paid
On January 1, 2020, Liu Corporation paid $241,960 to acquire bonds of Singh Investment Corp with a par value of $240,000. The annual contract rate on the bonds is 6% and interest is paid
The cost and fair value of non-strategic investments of International Journalist Corporation on December 31, 2020, and December 31, 2021, are as follows: Required 1. Prepare the fair value
Dynamic Express Inc. prepared the summary shown below regarding its investments on December 31, 2020, its year-end. Prepare the appropriate entry on December 31, 2020, to record the fair value
Is the FVTPL category used when management plans to hold investments to maturity or if they plan to actively trade the debt investments?
How is interest recognized on debt investments that are expected to be held for their contract life?
Significant influence exists under which presumed rule over the percentage ownership of voting shares:a. 15–20%b. 20–30%c. 20–50%d. 50% or more
On January 1, 2020, White River Corporation paid $2,499,760 to acquire bonds of Precision Investment Corp with a par value of $2,480,000. The annual contract rate on the bonds is 7.5% and interest
On January 1, 2020, Swift Current Corporation paid $2,540,240 to acquire bonds of Jasper Investment Corp with a par value of $2,520,000. The annual contract rate on the bonds is 7% and interest is
Pacific Fishing Inc.?s actively traded non-strategic investments as of December 31, 2020, are as follows: Pacific Fishing Inc. had no investments prior to 2020. Required 1. Prepare the fair value
On May 2, 2020, Systematic Industries Inc. acquired 1,200 common shares of Computer Gaming Corp. at $40.50 per share. Systematic’s intent is to sell the shares within eight to ten months. On August
Strategic investments are pursued for which of the following reasons:a. To participate in new markets or new technologiesb. To build a favourable business relationship, generally with a major
Thunderbird Corporation has excess cash resulting from extremely successful operations. It has decided to invest this cash in debt and equity securities as follows to be held as non-strategic
Safety Development Corporation had relatively large idle cash balances and invested them as follows in securities to be held as non-strategic investments: On December 31, 2020, the fair values of
Prepare entries to record the following non-strategic investment transactions of Wiki Garden Tool Inc. Assume each bond acquired is purchased with the intention to actively trade. Analysis
Identify the two key categories used to account for non-strategic investments with less than 20% ownership.
Corporations may choose to engage in a non-strategic investment in debt or shares for which of the following reasons:a. To earn greater interest or dividend income on available excess cashb. To earn
You are the chair of the board of CT Inc., a Canadian-based multinational corporation, which has excess cash totalling $75 million. The company is interested in investing some or all of this in
Delta Corporation showed the following adjusted trial balance at its year-end, December 31, 2020:
Live Large Inc. had the following transactions involving non-strategic investments during 2020. Required 1. Prepare an amortization schedule for the Space Explore bond showing only 2020 and 2021.
Prepare entries to record the following non-strategic investment transactions of Arrowhead Investment Corporation. Analysis Component: If the fair value adjusting entry on December 31, 2020, were
For Solar Industries and its related but separate financing company Solar Financing Corp, calculate the debt to equity ratio for 2019 and 2020. Explain why there are such significant differences in
Use the data in Exercise 14-25 to prepare journal entries that KEC Environmental Corp. would make to record the loan on December 31, 2020, and the four payments starting on December 31, 2021, through

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