Questions and Answers of Intermediate Accounting Volume 1

Benata Ltd. has the following assets:a. Goodwill.b. Trademark with a remaining life of ten years but renewable for an infinite period; expected to be used indefinitely.c. Customer lists.d.
You were recently approached by one of your clients, Wendy Wonders, the chief financial officer of Rock Group Ltd. (RGL), a Canadian public company with a 31 December year end. RGL manufactures and
Bright Lights Ltd. (Bright) is a private company incorporated five years ago by a group of friends who had recently graduated with business or engineering degrees. The group is interested in
Refer to the facts in A9 7.Data from A9-7.Consider each of the following items:a. Cost of an oil change on the company’s truck.b. Cost of major brake replacement in a large piece of construction
Parks Inc. had recently completed construction of a new manufacturing facility. Prior to the approval of the building permits, the company operated a parking lot on the land. This parking lot had
On 1 January 20X2, Rental Inc. purchased an apartment building. Apartments in this area are in high demand, and a wait list exists for potential tenants. The following costs were incurred for the
Real Estate Company (REC) has a number of apartment buildings that it holds for rent. In addition, it is holding land for capital appreciation. REC will either sell the land if the price is right or
Quispamsis Inc. (QI) recorded the following asset disposals during the year:a. A computer system with an original cost of $47,600, 80% depreciated, was judged obsolete during the period and
Machinery that cost $192,000 on 1 January 20X1 was sold for $72,000 on 30 June 20X6. It was being depreciated over a 10 year life by the straight line method, assuming its residual value would be
During 20X4, the Pencil Corp. entered into negotiations to buy Stilo Company, finally agreeing on a final cash purchase price of $534,000. Pencil will acquire all assets and liabilities of Stilo
Purple Corp. purchased all of the listed assets and liabilities of Sudden Corp. for $1,600,000. The following assets and liabilities were purchased:Required:1. What is the appropriate amount that
Yucatan Tours Corp. (YTC) established a new division in 20X8. The mandate of this new division is to establish a presence in the growing luxury eco tourism travel business. This division will offer,
Images Ltd. is a new company whose only operation is the development of a new kind of video camera that will link to home computers and easily allow image transfer. The camera will come with a
Impact Systems Inc. has recently designed and developed its own payroll system intended for internal use. If there is a market, the company may also decide to sell it to outside companies. Work on
Discoveries Ltd. (DL) is involved in research and development related to new processes to make manufacturing more efficient and environmentally friendly. The company has been working on a number of
Bruce Networks Ltd. (BNL) has a 10 year renewable lease contract with Open Ltd. (OL), the owner of a tall building in a major city. BNL is permitted to erect a transmission tower on the top of the
Fong Corp. reported various transactions in 20X2:a. Equipment with an original cost of $32,500 and accumulated depreciation of $26,000 was deemed unusable and was sold for $250 scrap value.b. A new
Casa Corp. needed a warehouse and maintenance facility on its company site, which already housed three manufacturing/storage facilities and the company head office. The lowest outside bid for the
Wonder Mountain Company operates a snow sports resort for skiers and snowboarders. The company has recently decided to replace an existing old chair lift with a new high speed quad chair and expand
GTT Company had the following transactions in 20X4:a. On 1 January 20X4, a new machine was purchased at a list price of $22,500. The company did not take advantage of a 2% cash discount available
The following cases are independent.Case A Starling Ltd. bought a building for $1,060,000. Before using the building, the following expenditures were made:Repair and renovation of building
Kettle Creek Inc. has various transactions in 20X6:a. Plant maintenance was done at a cost of $70,400.b. The entire manufacturing facility was repainted at a cost of $88,000.c. The roof on the
AGT Ltd. has identified several assets:a. Airplaneb. Wind farmc. Manufacturing facilityd. Cruise shipe. Hydro linesRequired:1. For each asset, identify several possible components:2. AGT has
O’Callaghan Inc. (OI) is in the highway construction business. OI’s property, plant, and equipment account includes heavy construction equipment. The following transactions relate to the disposal
Wired Productions Ltd. uses its website for sales and client information. Costs incurred last year include:Expenditure
Carlos Corp. recorded the following expenditures:1. Engineering work to improve a product’s design so it can be manufactured on a cost-effective basis2. Salaries of scientists searching for a way
DesRosier Company acquires a machine on 1 January 20X6, with a non-interest-bearing note that requires $10,000 to be paid on 31 December 20X6 and again on 31 December 20X7. The note has no explicit
Higher Ltd. purchased a large piece of earth-moving equipment for $5,000,000. The vehicle had six tires, each worth $100,000 and expected to last two years. This is the maximum value that should be
Lower Ltd. incurred the following expenditures:Oil and filter change on delivery vehicle ................................................ $ 120Repair to delivery vehicle after accident
“The thing you have to understand is how these stage plays work. You start out with just an idea, but generally no cash. That’s where promoters like me come in. We find ways of raising the money
“I cannot believe you have advised against an employee bonus this year,” exclaimed Jessica Simpson, senior accountant of Glowworm Inc. (GI), as she stormed into the office of the GI chief
The Yarn Store Inc. inventory records showed the following data relative to a particular item sold regularly (transactions occurred in the order given):Required:1. Weighted average (periodic
Leander Corp. reported the following items in its 20X5 financial statements:
Hansard Ltd. estimates its quarterly inventory by the retail inventory method. The following data are available for the quarter ended 30 June 20X7:Required:1. Prepare a schedule to compute the
You are auditing the records of Lin Corp. The company took a physical inventory under your observation. However, the valuations have not been completed. The records of the company provide the
Flint Publishers Inc. prepared its draft 20X6 financial statements in February 20X7. The draft SCI showed earnings of $1,100,000. After the draft statements were prepared, but prior to their approval
Pino Inc. is a BC based wine producer. In anticipation of a particularly bounteous grape harvest and a potential problem in obtaining a sufficient volume of shipping crates, Pino entered into a
Telma Ltd. is a public company incorporated in Alberta and traded on the Toronto Stock Exchange. In December 20X6, Telma management decided that cost exceeded NRV for a significant portion of the
The information shown below relating to the ending inventory was taken at lower of cost or NRV from the records of Electronics Corp.:Required:1. Determine the valuation of the above inventory at cost
At the end of 20X4, Sherpa Lighting Ltd. has a large stock of incandescent lighting fixtures that are becoming obsolete due to a new trend to low energy fluorescent and LED lighting fixtures. The
At the end of 20X5, Singh Inc. has four inventory items, two of which management believes should be written down. The cost and estimated NRVs of the items are as follows:Required:1. Determine the
Alomar Ltd. has been suffering the effects of strong price competition on a particular inventory item from an overseas company that has moved into Alomar’s Canadian market. At the end of 20X4,
Oporto Corp. produces and sells forklift trucks. Model 17A (the “Protex”) has a list price of $140,000. The production cost for the 20 finished Protex units in inventory at the end of 20X4 was
Digger Enterprises Ltd. has prepared the following information to support an inventory valuation as of 31 December 20X3 (in thousands of dollars):Required:Determine the amount of ending inventory
Rondo Ltd. (RL) is a wholesaler operation, with an active warehouse. Staff at RL have prepared a preliminary list of inventory, following its count on November 30.Required:Determine the dollar amount
In February 20X3, La Fondue Ltd. signed a two-year contract with a Quebec cheese supplier to provide a minimum of 1,000 kilograms of fine cheese for fondue at a fixed price of $20 per kilogram. By
Purple Corp. had a fire sprinkler go off in a warehouse, damaging 800 units of its regular inventory. Information with respect to the units:• Cost, $52 per unit• Regular selling price, $89 per
Meter Manufacturing Limited manufactures a component part in high volumes at a manufacturing facility in Hamilton, Ontario. The direct material cost for a unit is $12, direct labour is $18, and
Yarn Imports Corp. is preparing an inventory listing, and is assigning a cost to inventory that arrived on December 29, two days before the end of the year. The following elements of potential cost
Max Petfood Ltd. is preparing an inventory listing for April 30, its fiscal year-end. The following items have been identified:Required:Identify the items above that must be included in inventory of
Pepper Ltd. delivers 500 units of product to Salt Corp. The sales price was $125 per unit, and Pepper’s cost was $75 per unit. Pepper has agreed that Salt may return any unused product within 60
Love Your Pet, Inc. (LPI) is a pet food company located in rural Quebec. LPI has been operating for years as a distributor of pet food but in the last year has begun to manufacture raw dog food. In
Sumarah Corp. accepted a $450,000 two year note receivable from a customer in connection with a major inventory sale transaction on 1 October 20X5. The note was interest free, although market
Epsilon Ltd. accepted a $600,000 two year note receivable from a customer in connection with a major inventory sale transaction on 1 January 20X5. The note required annual end of year interest
Johnston Ltd. had the following transactions in 20X5:a. Sold goods on 1 June to a British customer for 140,000 euros with payment to be in four months.b. Sold goods to a U.S. customer on 15 June for
Grand Ltd. is a Canadian company that had the following transactions in 20X7:a. Sold goods to a customer in Belgium on 25 November for 220,000 euros.b. Sold goods to a U.S. customer on 25 November
MacWilliams Ltd. sold a $90,000 piece of machinery to a customer on 1 January 20X6, and took back a two year, 2% note receivable. The customer has to pay interest every 31 December, but the $90,000
South Company, a public company, sells large construction equipment. On 1 January 20X5, the company sold North Company a machine at a quoted price of $120,000. South collected $40,000 cash and
Accounts receivable for Smith Ltd. were reported on the statement of financial position prepared at the end of 20X8, as follows:Additional information:The company sells goods on account. At the end
At 31 December 20X8, Small Ltd. reported gross accounts receivable of $2,481,800. Investigation showed the following:a. The credit balance in the allowance for doubtful accounts was $182,400 after
The net accounts receivable on the books of GJY Corp. as of 1 January 20X3 are as follows:Accounts receivable ............................................................. $ 281,000Less:
The disclosure note of Big Products Ltd. showed the following (in millions):Required:1. Define financial instrument and financial asset.2. With respect to cash, explain why the asset is classified as
1. When initially recognized, accounts receivables are required to have a valuation allowance based on expected credit losses for their lifetime.2. For a new company with no history of uncollectible
Using the information from TR7-8 now assume the company is a private company and it has elected to use straight-line amortization.Data from from TR7-8Dharma, a public company, sold a piece of
Dharma, a public company, sold a piece of equipment at the beginning of Year 1, receiving a $10,000, two-year 2% note. Interest is paid at the end of each year. Market interest rates are assumed to
The following items would be included in cash and cash equivalents:1. 2% investment in common shares public company.2. 2% investment in common shares private company.3. 60-day investment
1. Loans and receivables are classified according to their business model.2. All notes receivables are measured at amortized cost.3. Overdrafts can be netted against a positive balance in a bank
Manufacturing Inc. (MI) is a public company that sells construction equipment to builders of primarily homes, office buildings, and highways. MI has been in operation for over 30 years. Up until this
Pewter Publishing Co. (PPC) prepares and publishes a monthly newsletter for an industry in which potential circulation is limited. Because information provided by the newsletter is available only
XYZ Co. had a variety of revenue transactions during the year. Below are the balances on the SFP related to its revenue transactions.Required:Using the information in the table, explain the effects
assurance warranty. Neuman management estimates that the probable cost of fulfilling the warranty will be $50,000. Between 1 May and 31 December 20X2, the actual warranty cost was $20,000. On 31
Shawinegan Development Co. (SDC) conducts research and development on specific projects under contract for clients; SDC also conducts basic research and attempts to market any new products or
In February, Huron Ltd. incurred costs to obtain a contract with a customer. The contract is for two years.The following costs were incurred:Travel costs to meet with the customer
Arrow Co. entered into a contract with a customer for $410,000. The contract is for the delivery of equipment and a three-year service maintenance contract for the equipment. Arrow sells separately
SorCo. Inc. has just entered into a sale agreement with a customer. The contract is for $1,100,000. However, the payments will be made as follows: 1 August 20X1 on date of delivery $500,000; 1 August
CCS is a construction company that builds roads in the Northwest Territories (NWT). CCS uses the percentage-of-completion method and measures completion on the basis of kilometres completed. In
Spreadsheets Made Easy (SME) is a company that designs and sells spreadsheet software. Corporate customers purchase licences for the number of users in their company who can access the software from
Under contract, Sojourn Co. delivers 1,000 units to Customer A for $50 each on 1 April. Sojourn’s documented policy is to allow a customer to return any unused product within 90 days and receive a
Dress for Success is an upscale dress shop. On 15 August, Sally, a regular customer, came in and put a deposit down on two items: $50 on a dress and $100 on a suit. The deposit was in the amount of
Princely Entertainment Ltd. (PEL) is an interactive entertainment company for the mobile world. Frank Prince and his family members own the majority of the 4,000 shares, and have financed all growth
The records of Koop Co. provided the following information for the year ended 31 December 20X8:Additional information:a. Sold equipment for cash (cost, $30,000; accumulated depreciation, $18,000).b.
Information related to various financial statement elements is provided for three cases:Case A Tax expense was $341,400. The deferred tax liability had an opening balance of $92,000 and a closing
Mackey Ltd. reported the following selected balances:Other Information:1. There was a stock dividend of $25,000 on common shares and a cash dividend of $35,000.2. Of the preferred shares, $50,000
The following selected information is available for Jones & Co. Ltd., for the year ended 31 December 20X8:Other Information:1. Equipment with an original cost of $100,000 was sold for cash.2.
Financial statements for Discovery Co. follow:Additional information:a. The company sold equipment that had an original cost of $584,000 and a net book value of $247,600. Other equipment was
Information related to capital assets is provided for three cases:Required:For each case, indicate the items and amounts that would appear on the SCF, along with their classification. Assume that the
The following financial information is available for Chipmunk Inc. for the 20X3 fiscal year:Additional information:1. Marketable securities were sold at their carrying value. The marketable
Refer to the data in A5-6.Data from A5-6The financial statements for Linked Ltd. are shown below:During the year, the company purchased a capital asset valued at $30,000; payment was made by issuing
Grand Corp.’s 20X2 financial statements showed the following:Additional information:During the year, equipment with an original cost of $82,000 was sold for cash.Required:1. Prepare the SCF, in
The financial statements for Linked Ltd. are shown below:During the year, the company purchased a capital asset valued at $30,000; payment was made by issuing common shares. Additional capital assets
Denton Corp.’s statement of financial position accounts as at 31 December 20X4 and 20X5 and information relating to 20X5 activities are presented below.Information relating to 20X5 activities:•
The records of Agricola Corp. provide information about transactions and events of the year. The company is preparing a SCF using the indirect presentation approach for operating activities.a. Sold
The records of Neon Corp. provided the following data:a. Purchased capital asset for $340,000; paid cash.b. Depreciation expense, $134,000.c. Sold a capital asset for $68,000 cash; original cost,
Information related to various financial statement elements is provided for two cases:Case A Operating expenses were $500,000. Inventory increased by $72,000, accounts payable increased by $50,000,
Selected accounts from the SFP of Gentron Ltd. at 31 December 20X5 and 20X4 are presented below. Gentron declared $100,000 of cash dividends during the year, and purchased $200,000 of machinery in
Selected accounts from the SFP of Passen Ltd. at 31 December 20X8 and 20X7 are presented below. Passen reported earnings of $100,000 in 20X8. There was a stock dividend recorded, valued at $50,000
Selected accounts from the SFP of Lexy Ltd. at 31 December 20X7 and 20X6 are presented below. During the year, equipment with an original cost of $200,000 and net book value of $85,000 was sold at a
Selected accounts from the SFP of Tabby Ltd. at 31 December 20X7 and 20X6 are presented below. Tabby reported earnings of $125,000 in 20X7, and depreciation expense was $20,000.Required:Calculate
The owner of Aurora Inc., Cindy Hickey, has come to you, a public accountant, for advice. “I am very worried about my business right now. My bank loan is at its maximum level, we have no cash, and
Prime Essentials Ltd. is a small private corporation. The owner plans to approach the bank for an additional loan or a line of credit to facilitate expansion. The company bookkeeper, after discussion

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