Questions and Answers of Intermediate Accounting Volume 1

On January 1, 2020, Schmitt Inc.'s general ledger had these liability accounts: CPP contributions payable......................................$ 2,152 EI premiums
Cléroux Corporation sold 150 colour laser copiers in 2020 for $4,000 each, including a one-year warranty. Maintenance on each machine during the warranty period averages
Lu Corp. erected and placed into service an offshore oil platform on January 1, 2020 at a cost of $10 million. Lu is legally required to dismantle and remove the platform at the end of its nine-year
Cool Sound Ltd. manufactures a line of amplifiers that carry a three-year warranty against defects. Based on experience, the estimated warranty costs related to dollar sales are as follows: first
Refer to the information for Lu Corp. in BE13.20. Prepare any necessary adjusting entries that are associated with the asset retirement obligation and related expenses at December 31, 2020, assuming
Selzer Equipment Limited sold 500 Rollomatics on account during 2020 for $6,000 each. Ignore any cost of goods sold. During 2020, Selzer spent $30,000 servicing the two-year warranties that are
Refer to the information for Lu Corp. in BE13.20 and BE13.21. Assume that the increase in the asset retirement obligation in 2020 related to the production of oil in 2020 was $61,942. Prepare any
Novack Machinery Co. manufactures equipment to a very high standard of quality; however, it must still provide a warranty for each unit sold, and there are instances where the machines do require
To increase sales, Bélanger Inc., a public company following IFRS, implemented a customer loyalty program that rewards a customer with one loyalty point for every $10 of purchases on a select group
Moleski Limited, a private company following ASPE, includes one coupon in each box of soap powder that it produces, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2020, Moleski
Jupiter Corp. provides at no extra charge a two-year warranty with one of its products, which was first sold in 2020. In that year, Jupiter sold products for $2.5 million and spent $68,000 servicing
Refer to the information for Jupiter Corp. in BE13.25. (a) Prepare entries for the warranty that recognize the sale as a multiple deliverable with the warranty as a separate service that Jupiter
Henry Corporation sells home entertainment systems. The corporation also offers to sell its customers a two-year warranty contract as a separate service. During 2020, Henry sold 20,000 warranty
On July 10, 2020, Nguyen Ltd. sold $1.7 million worth of compressors to retailers on account. Nguyen had paid $960,000 for these compressors. Nguyen grants the right to return compressors that do not
Wynn Corp. offers a set of building blocks to customers who send in three codes from Wynn cereal, along with $1. Wynn purchased 100,000 building block sets in 2020 for $2.50 each, and paid for them
At December 31, 2020, Lawton & Border Inc. (L&B) is involved in a lawsuit. Under existing standards in IAS 37, (a) prepare the December 31 entry assuming it is probable (and very likely)
Kawani Corporation has been operating for several years. On December 31, 2020, it presented the following SFP. Cost of goods sold in 2020 was $420,000, operating expenses were $51,000, and net
Harold Limited's condensed financial statements provide the following information: Instructions a. Determine the following: 1. Current ratio at December 31, 2020 2. Acid-test
Yuen Corporation shows the following financial position and results for the three years ended December 31, 2020, 2021, and 2022 (in thousands): For each year, calculate the current ratio, quick
Financial information for Cao Inc. follows. Instructions a. Calculate the following ratios or relationships of Cao Inc. Assume that the ending account balances are representative unless the
Adventureland Incorporated purchased metal to build a new roller coaster on December 31, 2020. Adventureland provided a $500,000 down payment and agreed to pay the balance in equal instalments of
Big Bath Emporium (BBE), a private company based in Toronto, is the city's largest manufacturer and vendor of bathtubs, showers, and sinks. The company sells products direct to consumers, and also
Lamanna Laundry Ltd. is a full-service laundry provider, focusing on high-end clientele. Lamanna Laundry has recently invested in new technology to improve efficiency. In order to finance the new
Brookfield Asset Management Inc. Access the financial statements and accompanying notes of Brookfield Asset Management Inc. for the year ended December 31, 2017, through SEDAR (www.sedar.com) or on
The following examples describe possible features or characteristics of long-term debt: 1. The debt agreement includes a covenant that requires the debtor to maintain a minimum amount of working
On June 1, 2020, MacDougall Corporation approached Silverman Corporation about buying a parcel of undeveloped land. Silverman was asking $240,000 for the land and MacDougall saw that there was some
RTL is a family-owned and operated business that prints flyers and banners. It has been in operation for over 20 years and is being passed on to the next generation. Profits from the past two years
Loblaw Companies Limited and Empire Company Limited Access the financial statements for Loblaw Companies Limited for the year ended December 30, 2017 and Empire Company Limited for the year ended May
The following amortization and interest schedule is for the issuance of 10-year bonds by Capulet Corporation on January 1, 2020, and the subsequent interest payments and charges. The company's year
Buchanan Corporation issues $500,000 of 11% bonds that are due in 10 years and pay interest semi-annually. At the time of issue, the market rate for such bonds is 10%. Calculate the bonds' issue
DBRS is a large bond-rating agency in Canada that develops credit ratings for companies as a whole and also for its specific securities. Instructions Access the agency's website at
Two independent situations follow: 1. On January 1, 2020, Divac Limited issued $300,000 of 10-year, 9% bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January
Venezuela Inc. is building a new hockey arena at a cost of $2.5 million. It received a down payment of $500,000 from local businesses to support the project, and now needs to borrow $2 million to
Samwall Ltd. needed funding to bridge the gap between paying its suppliers and collecting its receivables. As such, Samwall issued a $300,000, four-year, 8% note at face value to Easy Loan Bank on
At December 31, 2020, Burr Corporation owes $500,000 on a note payable due February 15, 2021. Assume that Burr follows IFRS and that the financial statements are completed and released on February
At December 31, 2020, Parew Corporation has a long-term debt of $700,000 owing to its bank. The existing debt agreement imposes several covenants related to Parew's liquidity and solvency. At
Refer to the data in E13.11 and assume instead that Mustafa Limited has chosen not to recognize paid sick leave until it is used, and has chosen to accrue vacation time at expected future rates of
Refer to the information about Clausius Ltd. in BE13.11. Assume instead that the tax return indicated 2020 income tax of $10,200. (a) Prepare the adjusting year-end entry to recognize the 2020
Mustafa Limited began operations on January 2, 2019. Mustafa employs nine individuals who work eight-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days
Clausius Ltd. made four quarterly payments of $3,200 each to the Receiver General for Canada during 2020 as instalment payments on its estimated 2020 corporate tax liability. At year end, Clausius's
The payroll of Sumerlus Corp. for September 2020 is as follows. Total payroll was $485,000. Pensionable (CPP) and insurable (EI) earnings were $365,000. Income taxes in the amount of $85,000 were
Refer to the information for DeGroot Limited in BE13.8. Assume that the amounts include tax. Prepare the entries for DeGroot. Round amounts to the nearest cent. Data From BE13.8.DeGroot Limited
DeGroot Limited conducts all of its business in a province with HST of 13%. Prepare the summary journal entry to record DeGroot's sales for the month of July, during which customers purchased $37,500
On December 31, 2020, Zimmer Corporation has $7.9 million of short-term debt in the form of notes payable that are due in 2021 to Provincial Bank. On January 28, 2021, Zimmer enters into a
On December 31, 2020, Hornsby Corporation had $1.2 million of short-term debt in the form of notes payable due on February 2, 2021. On January 21, 2021, in order to ensure that it had sufficient
Shaddick Corp., a public company following IFRS, began its 2020 fiscal year with a debit balance of $11,250 in its Income Tax Receivable account. During the year, Shaddick made quarterly income tax
Takemoto Inc. borrowed $60,000 on November 1, 2020, by signing a $61,350, three-month, zero-interest-bearing note. (a) Using a financial calculator or Excel, calculate the effective interest
Conduit Corporation has 45 current employees: 5 managers and 40 non-managers. The average wage paid is $250 per day for non-managers. The company has just finished negotiating a new employee contract
Sararas Ltd., a private company following ASPE, is a merchant and operates in the province of Ontario, where the HST rate is 13%. Sararas uses a perpetual inventory system. Transactions for the
Refer to the information for Upland Limited in BE13.4. Assume that Upland uses reversing entries. Prepare the 2021 journal entry(ies) for Upland. Data From BE13.4Upland Limited borrowed $40,000
City Goods Limited (CG) is a sports clothing and equipment retailer that has a chain of 10 stores across Canada. You have just been hired as the new controller for the company. You are currently
Diagnostics Corp. follows IFRS and sells its products in expensive, reusable containers that can be tracked. The customer is charged a deposit for each container that is delivered and receives a
Upland Limited borrowed $40,000 on November 1, 2020, by signing a $40,000, three-month, 9% note. Prepare Upland's November 1, 2020 entry; the December 31, 2020 annual adjusting entry; and the
You, the ethical accountant, are the new controller at ProVision Corporation. It is January 2021 and you are currently preparing the December 31, 2020 financial statements. ProVision manufactures
The consolidated financial statements of Deutsche Lufthansa AG for the year ended December 31, 2017, are available in the company's 2017 annual report on the www.lufthansagroup.com
The following are selected 2020 transactions of Darby Corporation. Sept. 1 Purchased inventory from Orion Ltd. on account for $50,000. Darby uses a periodic inventory system. Oct. 1 Issued a
The 2017 financial statements (for the year ended December 30, 2017) and 10-year financial review (use the 2016 annual report) of Canadian Tire Corporation, Limited can be found at www.sedar.com or
Access the annual financial statements of Empire Company Limited for its year ended May 6, 2017, at www.sedar.com or the company's website. InstructionsReview Empire Company Limited's
Adopt the role of company management and discuss the treatment of the “Fly 5, Fly Free” program for financial reporting purposes. The company is interested in understanding how the program would
On 1 January 20X8, Khalil Ltd. purchased $2,000,000 of six year, Harvest Ltd. 5.4% bonds. The bonds pay semi annual interest each 30 June and 31 December. The market interest rate was 6% on the date
Return to the facts of A11-7. Assume now that New Company is a private company that complies with ASPE. Straight line amortization will be used rather than the effective interest method.Data from
The following comparative data are available from the 20X4 statement of financial position of Trevor Holdings Ltd:In 20X4, the following transactions took place and are properly reflected in the
On 31 December 20X6, TKB Company’s investments in equity securities were as follows:Required:1. Explain what the carrying value for each investment represents.2. What was the original cost of the
Royals Imports is a public company. It reported the following at the end of 20X5:The following transactions and events took place in 20X6:a. Dividends received, Huebner Co, $1.20 per share, Adams
On 1 January 20X5, Zan Company purchased 5,000 of the 20,000 outstanding common shares of Woo Computer Corp. (WC) for $120,000 cash. Zan had significant influence as a result of the investment and
Premium Investments Ltd. bought the following bond investment: $4,000,000 bonds of Trans BC Operations Ltd. The bonds were purchased 1 Feb 20X5. Interest at 6% is payable semi annually on January 31
Lauren Corp. purchased a $728,000 investment in the common shares of Reesh Corp. on 15 May 20X5. The investment is a FVTPL investment. Reesh is a private company and few shares are bought and sold.
On 22 May 20X5, Friedland Ltd. purchased 52,000 shares of Gerstan Ltd. for US$13.40 per share, plus US$2,000 in commissions and fees. The shares were purchased from a broker on account, with later
Cudmore Ltd. had two FVTPL investments at the end of 20X4, disclosed on the SFP as follows:By the end of 20X4, unrealized losses of $3,700 related to the Kelowna Ltd. shares and unrealized gains of
On 1 May 20X7, Bertrum Ltd. purchased $1,000,000 of Fox Corp. 6.2% bonds. The bonds pay semi annual interest each 1 May and 1 November. The market interest rate was 6% on the date of purchase. The
On 1 January 20X5, Franco Ltd. purchased $400,000 of Gentron Company 5% bonds. The bonds pay semi annual interest each 30 June and 31 December. The market interest rate was 6% on the date of
On 1 July 20X2, New Company purchased $600,000 of Old Corp. 5.5% bonds, classified as an AC investment. The bonds pay semi annual interest each 30 June and 31 December. The market interest rate was
Timmins Ltd. owns a number of investments in bonds. Timmins has a 31 December year end. Case A $3,000,000 bonds in Lakehead Corp. a publicly traded company. The bonds are currently classified as
On 3 January 20X5, London Company entered into a joint arrangement with two other investors to develop a gold mine called JDX Gold. Based on the contractual arrangement, London will have rights to
In 20X1, FYY Ltd. purchased 500 shares of Humor Inc. for $6,000 plus $500 in commission. The shares had a fair value of $19,000 at the end of 20X1, $25,000 at the end of 20X2, and $40,000 at the end
On 30 June 20X2, King Ltd. purchased 10,000 shares of Prince Inc. for $12,000 plus $1,000 in commission. In 20X2, the company received $500 of dividends, and the shares had a fair value of $16,000 at
On 1 July 20X2, King Ltd. purchased $500,000 bonds of Princess Inc. at par. The bonds pay 6% interest annually on June30. The bonds mature on30June20X9. King has a June30year-end.At30June 20X3, King
On 1 January 20X2, Speedy Company purchased $3,000,000 of Wind Corp. 3% bonds, classified as an FVOCI-Bond investment for $2,737,438. The bonds pay semi-annual interest each 30 June and 31 December.
On 1 January 20X2, Lucky Company purchased $5,000,000 of Fire Corp. 3% bonds, classified as a FVTPL. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 4%
On 1 January 20X4, Queen Company purchased $5,000,000 of Sport Corp. 7% bonds, classified as an FVOCI-Bonds investment. The bonds pay semi-annual interest each 30 June and 31 December. The market
Quinter Corp. (QC) was formed in April 20X5 and funded by five shareholders that are public companies. Assuch, the shareholders are requiring that QC adopt IFRS even though it is a private company.
LaMar Company purchased several small pieces of equipment in May 20X5 for $300,000, which qualified as a Class 8 asset for tax purposes.30 September 20X6 ........................... Sold
Lindsay Ltd. reflected the following items in the 20X5 financial statements:Income statementDepreciation expense, machinery .........................................$1,200,000Amortization expense,
Information has been collected regarding Price Inc.’s cash generating unit that includes goodwill. At 31 December 20X5, the assets of the Price’s CGU are shown as follows (in millions):An
Information has been collected regarding Orange Company’s cash generating unit that includes goodwill. At 31 December 20X5, the assets of the Orange Company’s cash generating unit are shown as
The abrasives group of Chemical Products Inc. (CPI) has been suffering a decline in its business, due to new product introductions by competitors. At 31 December 20X5, the assets of the abrasives
Yuan Inc. has a large piece of machinery, and management has determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the
Bright Designs Ltd. began operations in 20X5 and, at the end of its first year of operations, reported a balance of $601,500 in an account called “intangibles.” Upon further investigation, it is
The following information relates to Riggs Corp.’s purchase of equipment on 15 June 20X7:Invoice price ................................................................................
A large piece of equipment acquired on 1 January 20X5 by Kapadia Company has four major components for depreciation. Details regarding each component are given in the schedule below:Required:1.
Earth Construction Inc. (ECI) bought a large piece of construction equipment at the beginning of 20X5.• The construction equipment was a large piece of heavy equipment with an original cost of
Boat Ltd. has a major asset that has just been purchased and has been segregated into the following significant components made up of spare parts and major inspections. Component D consists of a
Quality Producers acquired factory equipment on 1 January 20X5, costing $156,000. Component parts are not significant and need not be recognized and depreciated separately. In view of pending
You have been asked to consider the following situations.Case A The company purchased a machine for $25,000 cash. The machine will probably have a useful life of 10 years but it has a component part
The methods of depreciation or amortization demonstrated in the chapter include the following:a. Straight lineb. Productive outputc. Declining balanceRequired:Indicate the likely choice of
Great George Ltd. purchased a group of equipment in December 20X8 for $100,000. In 20X9, the company sold one asset with an original cost of $25,000, for $6,000. It spent $40,000 on a new replacement
Montonne Corp. is a private company that complies with ASPE. Montonne has a piece of equipment that cost $254,000. Its useful life to the company is estimated to be 15 years, after which it is
Bovine Ltd. has the following assets in a CGU:
Phillips Ltd. purchased a machine on 26 March 20X3 for $90,000 and began to use it immediately. The estimated useful life of the machine is 5 years, and it has an expected residual value of $10,000
Vert Ltd. purchased a vehicle on 1 January 20X8 for $34,000 and began to use it immediately. The estimated physical life of the vehicle is 20 years, but the estimated useful life to Vert is 10 years.

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