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intermediate accounting ifrs 4th edition

Questions and Answers of Intermediate Accounting IFRS 4th Edition

Consider the following independent situations.Instructionsa. Gottlieb Stores owes €199,800 to Ceballos SpA. The debt is a 10-year, 11% note. Because Gottlieb is in financial trouble, Ceballos
Strickland Company owes $200,000 plus $18,000 of accrued interest to Moran State Bank. The debt is a 10-year, 10% note. During 2022, Strickland’s business deteriorated due to a faltering regional
At December 31, 2022, Hyasaki Corporation has the following account balances:Bonds payable, due January 1, 2030 ............ $1,912,000Interest payable
Kobiachi Group had bonds outstanding with a maturity value of ¥5,000,000. On April 30, 2023, when these bonds had an unamortized discount of ¥100,000, they were called in at 104. To pay for these
Identify the situations under which debt is extinguished.
On June 30, 2014, Mendenhal plc issued 8% bonds with a par value of £600,000 due in 20 years. They were issued at 82.8414 to yield 10% and were callable at 104 at any date after June 30, 2022.
Refer to the note issued by Coldwell AG in BE14.9. During 2022, Coldwell experiences financial difficulties. On January 1, 2023, Coldwell negotiates a modification of the terms of the note. Under the
Differentiate between a fixed-rate mortgage and a variable-rate mortgage.
Presented below are three independent situations.Instructionsa. On January 1, 2022, Langley Co. issued 9% bonds with a face value of $700,000 for $656,992 to yield 10%. The bonds are dated January 1,
On January 2, 2019, Prebish Corporation issued $1,500,000 of 10% bonds to yield 11% due December 31, 2028. Interest on the bonds is payable annually each December 31. The bonds are callable at 101
Refer to the note issued by Coldwell AG in BE14.9. During 2022, Coldwell experiences financial difficulties. On January 1, 2023, Coldwell negotiates a settlement of the note by issuing to Flint Hills
Crocker plc owes Yaeger Ltd. a 10-year, 10% note in the amount of £330,000 plus £33,000 of accrued interest. The note is due today, December 31, 2022. Because Crocker is in financial trouble,
On January 1, 2022, Durdil A.Ş. borrowed and received 500,000 from a major customer evidenced by a zero-interest-bearing note due in 3 years. As consideration for the zero-interest-bearing feature,
On January 1, 2022, Henderson Corporation retired $500,000 of bonds at 99. At the time of retirement, the unamortized premium was $15,000. Prepare Henderson’s journal entry to record the
Shlee SA issued a 4-year, €60,000, zero-interest-bearing note to Garcia Company on January 1, 2022, and received cash of €60,000. In addition, Shlee agreed to sell merchandise to Garcia at an
The following are two independent situations.Instructionsa. On January 1, 2022, Spartan Inc. purchased land that had an assessed value of $390,000 at the time of purchase. A $600,000,
On January 1, 2022, McLean AG makes the two following acquisitions.1. Purchases land having a fair value of €300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of
McCormick Corporation issued a 4-year, $40,000, 5% note to Greenbush Company on January 1, 2022, and received a computer that normally sells for $31,495. The note requires annual interest payments
On January 1, 2022, Osborn plc sold 12% bonds having a maturity value of £800,000 for £860,651.79, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2022, and mature
On April 1, 2022, Sarkar Sailboats sold 15,000 of its 11%, 15-year, R$1,000 face value bonds to yield 12%. Interest payment dates are April 1 and October 1. On April 2, 2023, Sarkar took advantage of
Pawnee Inc. has issued three types of debt on January 1, 2022, the start of the company’s fiscal year.a. $10 million, 10-year, 13% unsecured bonds, interest payable quarterly. Bonds were priced to
Samson plc issued a 4-year, £75,000, zero-interest-bearing note to Brown Ltd. on January 1, 2022, and received cash of £47,664. The implicit interest rate is 12%. Prepare Samson’s journal entries
Presented below are selected transactions on the books of Simonson Foundry. July 1, 2022Bonds payable with a par value of €900,000, which are dated January 1, 2022, are sold at 112.290 plus
Coldwell AG issued a €100,000, 4-year, 10% note at face value to Flint Hills Bank on January 1, 2022, and received €100,000 cash. The note requires annual interest payments each December 31.
Tan Ltd. issued HK$600,000,000 of 7% bonds on November 1, 2022, for HK$644,636,000. The bonds were dated November 1, 2022, and mature in 10 years, with interest payable each May 1 and November 1. The
In each of the following independent cases, the company closes its books on December 31.1. Sanford Co. sells $500,000 of 10% bonds on March 1, 2022. The bonds pay interest on September 1 and March 1.
On June 30, 2021, Macias SA issued R$5,000,000 face value of 13%, 20-year bonds at R$5,376,150 to yield 12%. The bonds pay semiannual interest on June 30 and December 31.Instructionsa. Prepare the
Presented below are three independent situations.Instructionsa. McEntire Co. sold $2,500,000 of 11%, 10-year bonds at 106.231 to yield 10% on January 1, 2022. The bonds were dated January 1, 2022,
Sabonis Cosmetics Co. purchased machinery on December 31, 2021, paying $50,000 down and agreeing to pay the balance in four equal installments of $40,000 payable each December 31. An assumed interest
Chen Ltd. issued its 9%, 25-year mortgage bonds in the principal amount of ¥30,000,000 on January 2, 2008, at a discount of ¥2,722,992 (effective rate of 10%). The indenture securing the issue
Spencer plc sells 10% bonds having a maturity value of £3,000,000 for £2,783,724. The bonds are dated January 1, 2022, and mature January 1, 2027. Interest is payable annually on January
On January 1, 2022, JWS Corporation issued $600,000 of 7% bonds, due in 10 years. The bonds were issued for $559,224, and pay interest each July 1 and January 1. Prepare the company’s journal
Matt Ryan Corporation is interested in building its own soda can manufacturing plant adjacent to its existing plant in Partyville, Kansas. The objective is to ensure a steady supply of cans at a
Briefly explain how bond premium or discount affects interest expense over the life of a bond.
On December 31, 2022, Faital plc acquired a computer system from Plato Group by issuing a £600,000 zero-interest-bearing note, payable in full on December 31, 2026. Faital’s credit rating permits
Assume the same information as in E14.4, except that the bonds were issued at 84.95 to yield 12%. InstructionsPrepare the journal entries to record the following. Round to the nearest euro.a.
Devers plc issued £400,000 of 6% bonds on May 1, 2022. The bonds were dated January 1, 2022, and mature January 1, 2024, with interest payable July 1 and January 1. The bonds were issued at face
Part I: The required method of amortizing a premium or discount on issuance of bonds is the effective-interest method.InstructionsHow is amortization computed using the effective-interest method, and
Samantha Cordelia, an intermediate accounting student, is having difficulty amortizing bond premiums and discounts using the effective-interest method. Furthermore, she cannot understand why IFRS
Foreman Cleaners issued €800,000 of 10%, 20- year bonds on January 1, 2022, at 119.792 to yield 8%. Interest is payable semiannually on July 1 and January 1.InstructionsPrepare the journal entries
On March 1, 2023, Sealy Sundries sold its 5-year, £1,000 face value, 9% bonds dated March 1, 2023, at an effective annual interest rate (yield) of 11%. Interest is payable semiannually, and the
Good-Deal Auto developed a new sales gimmick to help sell its inventory of new automobiles. Because many new car buyers need financing, Good-Deal offered a low down payment and low car payments for
Presented below are two independent situations.1. On January 1, 2022, Divac SA issued €300,000 of 9%, 10-year bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January
Schrempf AG has completed a number of transactions during 2022. In January, the company purchased under contract a machine at a total price of €1,200,000, payable over 5 years with installments of
Venzuela Co. is building a new hockey arena at a cost of $2,500,000. It received a down payment of $500,000 from local businesses to support the project and now needs to borrow $2,000,000 to complete
The Colson Company issued €300,000 of 10% bonds on January 1, 2022. The bonds are due January 1, 2027, with interest payable each July 1 and January 1. The bonds are issued at face value. Prepare
On January 1, 2023, Nichols Company issued for $1,085,800 its 20-year, 11% bonds that have a maturity value of $1,000,000 and pay interest semiannually on January 1 and July 1. Bond issue costs were
Presented below are various account balances.a. Bank loans payable of a winery, due March 10, 2025. (The product requires aging for 5 years before sale.)b. Serial bonds payable, €1,000,000, of
The following information is related to Leland AG.Instructionsa. Compute the following ratios or relationships of Leland. Assume that the ending account balances are representative of the entire year
EAN Ltd.’s condensed financial statements provide the following information amounts in thousands.
The following amortization and interest schedule reflects the issuance of 10-year bonds by Capulet SpA on January 1, 2016, and the subsequent interest payments and charges. The company’s year-end
Chen Group has been operating for several years, and on December 31, 2022, presented the following statement of financial position amounts in thousands.The net income for 2022 was ¥25,000. Assume
The following situations relate to Bolivia Company.1. Bolivia Company provides a warranty with all products sold. It estimates that it will sell 1,000,000 units of its product for the year ended
Presented below are three independent situations.1. Bruegger Transportation purchased a ship on January 1, 2022, for £20,000,000. The useful life of the ship is 40 years, but it is subject to a
The following are three independent situations.1. Hairston Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Hairston’s
Bassinger Company purchases an oil tanker depot on January 1, 2022, at a cost of $600,000. Bassinger expects to operate the depot for 10 years, at which time it is legally required to dismantle the
Cargo Company purchased land from Hazard Company for €20,000,000 on September 13, 2022. On October 31, 2022, it learned that the site was contaminated. As a result, Cargo sued Hazard for
Presented below are three independent situations.1. During 2022, Maverick ASA became involved in a tax dispute with the government. Maverick’s attorneys have indicated that they believe it is
Wynn Company offers a set of building blocks to customers who send in 3 box tops from Wynn cereal, along with 50¢. The block sets cost Wynn $1.10 each to purchase and 60¢ each to mail to customers.
On December 31, 2022, the board of Dolman Group decided to close one of its divisions. The same day a detailed plan for closing the division was agreed to by the board, and letters were sent to
Leppard AG sells DVD players. The company also offers its customers a 4-year warranty contract. Early in 2022, Leppard sold 20,000 warranty contracts at €99 each. The company spent €180,000
EADS Ltd. is involved in a restructuring related to its energy division. The company controller and CFO are considering the following costs to accrue as part of the restructuring. The costs are as
Streep Factory provides a 2-year warranty with one of its products which was first sold in 2022. Streep sold $1,000,000 of products subject to the warranty. Streep expects $125,000 of warranty costs
Schmitt Company must make computations and adjusting entries for the following independent situations at December 31, 2022.1. Its line of amplifiers carries a 3-year assurance-type warranty against
No Doubt Company includes 1 coupon in each box of soap powder that it packs, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2022, No Doubt Company purchased 8,800 premiums at 80
Calaf’s Drillers erects and places into service an off-shore oil platform on January 1, 2022, at a cost of £10,000,000. Calaf estimates it will cost £1,000,000 to dismantle and remove the
You are the independent auditor engaged to audit Millay Ltd.’s December 31, 2022, financial statements. Millay manufactures household appliances. During the course of your audit, you discover the
Early in 2022, Sheryl Crow Equipment sold 500 Rollomatics at €6,000 each. During 2022, Crow spent €20,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable
Garison Music Emporium carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. Garison uses two sales promotion techniques—warranties and
Soundgarden Ltd. sold 200 color laser copiers on July 10, 2022, for £4,000 apiece, together with a 1-year warranty. Maintenance on each copier during the warranty period is estimated to be
Scorcese A.Ş. is involved in a lawsuit at December 31, 2022. (a) Prepare the December 31 entry assuming it is probable that Scorcese will be liable for 900,000 as a result of this
Polska SA, in preparation of its December 31, 2022, financial statements, is attempting to determine the proper accounting treatment for each of the following situations.1. As a result of uninsured
Allison Hardware Company’s payroll for November 2022 is as follows: factory, €140,000; sales, €32,000; and administrative, €36,000. The Social Security rate is 8% on an employee’s wages.
Mayaguez Ltd. provides its officers with bonuses based on net income. For 2021, the bonuses total £350,000 and are paid on February 15, 2022. Prepare Mayaguez’s December 31, 2021, adjusting entry
On November 24, 2021, 26 passengers on Wong Airlines Flight No. 901 were injured upon landing when the plane skidded off the runway. Personal injury suits for damages totaling NT$9,000,000 were filed
The payroll of Kee Ltd. for September 2022 is as follows (amounts in thousands): total payroll was ¥340,000; income taxes in the amount of ¥80,000 were withheld, as was ¥9,000 in union dues; and
Kasten SA provides paid vacations to its employees. At December 31, 2022, 30 employees have each earned 2 weeks of vacation time. The employees’ average salary is €700 per week. Prepare
Sycamore Candy offers an MP3 download (seven-single medley) as a premium for every five candy bar wrappers presented by customers together with £2.50. The candy bars are sold by the company to
To stimulate the sales of its Alladin breakfast cereal, Loptien NV places 1 coupon in each box. Five coupons are redeemable for a premium consisting of a children’s hand puppet. In 2023, the
Alvarado Company sells a machine for $7,400 with a 12-month warranty agreement that requires the company to replace all defective parts and to provide the repair labor at no cost to the customers.
Use the same information as in E13.6, except that Matthewson SA has chosen (1) Not to accrue paid sick leave until used (2) To accrue vacation time at expected future rates of pay without
The following two independent situations involve litigation provisions.Part 1: Benson plc sells two products, Grey and Yellow. Each carries a 1-year warranty. 1. Product Grey—Product warranty
Dos Passos SA sells televisions at an average price of R$900 and also offers to each customer a separate 3-year warranty contract for R$90 that requires the company to perform periodic services and
Matthewson SA began operations on January 2, 2021. It employs 9 individuals who work 8-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days annually. Vacation
Presented below is a note disclosure for Matsui Group.Litigation and Environmental: Matsui has been notified or is a named or a potentially responsible party in a number of governmental and private
Brooks Ltd. sells computers under a 2-year warranty contract that requires the company to replace defective parts and to provide the necessary repair labor. During 2022, Brooks sells for cash 400
Presented below are four different situations related to Mckee plc debt obligations. Mckee’s next financial reporting date is December 31, 2021. The financial statements are authorized for issuance
On February 1, 2022, a huge storage tank owned by Viking Manufacturing exploded. Windows in houses and other buildings within a 1-mile radius of the explosion were severely damaged, and a number of
Below is a payroll sheet for Otis Import plc for the month of September 2022. Assume a 10% income tax rate for all employees and an 8% Social Security tax on employee and employer.Instructionsa.
The CFO for Yong Corporation is discussing with the company’s CEO issues related to the company’s short-term obligations. Presently, both the current ratio and the acid-test ratio for the company
At December 31, 2021, Burr AG owes €500,000 on a note payable due February 15, 2022. (a) If Burr expects to refinance the obligation by issuing a long-term note on February 14 and using the
As discussed in the chapter, an important consideration in evaluating current liabilities is a company’s operating cycle. The operating cycle is the average time required to go from cash to cash in
Kobayashi Ltd. reports in the current liability section of its statement of financial position at December 31, 2021 (its year-end), short-term obligations of ¥15,000,000, which includes the current
On December 31, 2021, Alexander AG had €1,200,000 of short-term debt in the form of notes payable due February 2, 2022. On January 21, 2022, the company issued 25,000 ordinary shares for €36 per
Takemoto Ltd. borrowed ¥60,000,000 on November 1, 2021, by signing a ¥61,350,000 3 month, zero-interest-bearing note. Prepare Takemoto’s November 1, 2021, entry; the December 31, 2021, annual
Rodriguez Corporation includes the following items in its liabilities at December 31, 2021.1. Notes payable, $25,000,000, due June 30, 2022.2. Deposits from customers on equipment ordered by them
The following are selected 2022 transactions of Darby Corporation.Sept. 1Purchased inventory from Orion Company on account for $50,000. Darby records purchases gross and uses a periodic inventory
Upland Company borrowed $40,000 on November 1, 2021, by signing a $40,000, 9%, 3 month note. Prepare Upland’s November 1, 2021, entry; the December 31, 2021, annual adjusting entry; and the
Hincapie AG manufactures specialty bike accessories. The company is best known for its product quality, and it has offered one of the best warranties in the industry on its higher-priced items—a
The financial statements of M&S (GBR) are presented in Appendix A. The company’s complete annual report, including the notes to the financial statements, is available online.InstructionsRefer

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