Questions and Answers of Intermediate Accounting Volume 1

On January 1, 2019, Carat Company agreed to sell a diamond to a customer at a special price of $5,000. Payment terms were $1,000 on January 1, 2019, and $1,000 each January 1 from 2020 to 2023. Carat
Cautious Construction Company has contracted to build an office building for Property Corporation. The construction started on January 1, 2018, and the project was completed on July 1, 2021. The
Fraternal Brothers provides consulting services on contract for a standard hourly rate of $100 per hour. The contracts allow the company to invoice the client evenly during the contract period. The
Pacific Communication Systems (PCS) uses the aging method for its accounts receivable. On January 1, 2020, the balance in the allowance for doubtful accounts was $2.25 million. For the year ended
Schott Construction is the contractor for a building project for an educational institution. The project was scheduled to be completed over three years from 2018 to 2020. The contracted price was $80
Grayson Co. (GC) uses the percentage of sales method for estimating bad debts for monthly reporting purposes. On January 1, 2020, the allowance for doubtful accounts balance was $5,000 Cr. GC had
Continental Shelving Company made a sale to Excalibur Knives for $5,000 on December 10, 2020. Approaching year-end, Continental wanted to encourage prompt payment, so it provided generous discounts
Megacorp uses the cost-to-cost ratio to apply the percentage of completion method. It is currently early 2021. The following table provides information relating to one of its projects so far. The
Beetles Geophysics issues an invoice to Yukon Goldmines for $300,000 on August 5, 2020. The invoice states the payment terms to be 2/10 net 45. Yukon pays the invoice on August 14,
Jay Company’s general ledger indicates a cash balance of $6,000 as at the end of October 2019, prior to completing a bank reconciliation. The bookkeeper has identified the following
Construction Co. started a contract in June 2017 to build a small foot bridge at a fixed price of $10 million. The bridge was to be completed by October 2019 at a total estimated cost of $8 million.
Corus Corporation builds large cruise ships on a contract basis. The company uses the percentage of completion method of revenue recognition. The following information pertains to the construction
The following is a partial list of accounts and their balances for Davidson Company as at December 31, 2019: Net income for the year was $838,000 and the company declared $400,000 in dividends
The following is a pre-closing trial balance for Kalico Kats, as at December 31, 2021:During the year, the company declared and paid $500,000 of dividends and issued shares for proceeds of
During the audit of Keats Island Brewery for the fiscal year ended June 30, 2022, the auditors identified the following issues: a. The company sells beer for $1 per bottle, plus $0.10 deposit on
The following is a pre-closing trial balance for Axo Inc., a manufacturer of metal tubing, as at December 31, 2019:During the year, the company declared and paid dividends of $300,000, and issued
Incomplete Transactions Company was started on January 1, 2021. During its first year of operations, the company had a choice of accounting policies. The chief financial officer identified the
Easy Own offers its customers an installment sales option whereby customers can pay monthly installments over 36 months. In July 2019, the company made $7.2 million of sales on installment. The
The following presents Oscar Equipment Company’s draft financial statements for December 2022, with comparative figures for 2021. Amounts are in $000’s. During 2022 (2021), the company
Why does revenue recognition on installment sales differ from that on more typical transactions involving the sale of goods?
Cross Company Limited, a private company, was started on January 1, 2021. For the first year, the chief accountant prepared the financial statements and a local accountant completed the necessary
A magazine publisher delivers 50,000 copies of its November magazine on October 26 to retailers. The retailers display the new magazines and remove the old (October) copies from the shelves by the
Penticton Okanagan Vineyards (POV) is a grape grower and wine producer with a February 28 year-end. The annual financial statements for 2019 were issued on April 15, 2019. Consider the following
Xtra Foods is a meat processing company. The annual financial statements for the year ended July 31, 2020, were issued on September 25, 2020. Consider the following events (assume all amounts are
The date is February 26, 2021, and you are in the process of making adjusting entries for Bellevue Company for the year ended December 31, 2020. In your analysis of accounts receivable and bad debts,
Explain why estimates are an essential part of financial reporting that cannot be avoided. Also explain how the need for estimates leads to the potential accounting numbers to be biased. In your
Sleep King Manufacturing Company (SKMC) is a public manufacturing company specializing in the fabrication of mattresses. The company has been operating from its headquarters in Toronto since 1995.
In the revision to the IFRS Conceptual Framework, scheduled for issuance in 2018, the IASB considered whether to clarify that trade-offs need to be made between the qualitative
Identify whether each concept in the following table relates to(i) An element,(ii) An assumption, (iii) A constraint in the IFRS framework. Concept a. Expense b. Capital maintenance c. Cost d.
Identify whether each statement in the following table is true or false. Statement a. Conceptual frameworks for financial reporting are purely conceptual and do not relate to the practice of
West Pacific (WP) is a financial institution incorporated in 2007 and traded on the Toronto Stock Exchange. Its performance has been exceptional since the original issue. Your firm of chartered
QAF Company is a clothing retailer with locations in major Canadian cities. Its shares are publicly traded. In 2021 and 2022, the company’s financial performance was less than stellar, as shown in
In February 2010, Vancouver hosted the XXI Olympic Winter Games. As part of the Games, the city commissioned the construction of an Olympic village, which housed the athletes during the Games. The
Bremner Health Insurance Company (BHIC) is a publicly traded medical insurance company in the United States. At the time of establishment in 2019, the company decided to provide medical insurance to
The adjusted trial balance of North Bay Corporation is provided in the following work sheet for the year ended December 31, 2020. Instructions The note payable is due in four months.
On December 31, adjusting information for Big & Rich Corporation is as follows: 1. Estimated depreciation on equipment is $3,400. 2. Property taxes amounting to $2,525 have been
The trial balance for Hanna Resort Limited on August 31 is as follows: Additional information: 1. The balance in Prepaid Insurance includes the cost of four months premiums for an insurance
Using the information from BE18.3, prepare Nilson's journal entry to record 2020 income tax. Assume a tax rate of 25% and that Nilson uses the taxes payable method of accounting for income taxes
Tiger Inc. has the following year-end account balances: Sales Revenue $928,900; Interest Income $17,500; Cost of Goods Sold $406,200; Operating Expenses $129,000; Income Tax Expense $55,100; and
Pelican Inc. made a December 31 adjusting entry to debit Salaries and Wages Expense and credit Salaries and Wages Payable for $2,700. On January 2, Pelican paid the weekly payroll of $5,000. Prepare
On August 1, Secret Sauce Technologies Inc. paid $12,600 for an insurance policy that is for two years and is effective August 1. Prepare two sets of journal entries for Secret Sauce, with each set
Penron Limited is in the energy business, buying and selling gas and oil and related derivatives. It is a public company whose shares are widely held. It underwent a tremendous expansion over the
In June 2021, the board of directors for Holtzman Enterprises Inc. authorized the sale of $10 million of corporate bonds. Michelle Collins, treasurer for Holtzman Enterprises Inc., is concerned about
At December 31, 2020, Bouvier Corp. has assets of $10 million, liabilities of $6 million, common shares of $2 million (representing 2 million common shares of $1.00 par), and retained earnings of $2
Leopard Corporation is currently preparing its annual financial statements for the fiscal year ended April 30, 2020, following IFRS. The company manufactures plastic, glass, and paper containers for
Three independent situations follow. Situation 1 A company received a notice from the provincial environment ministry that a site the company had been using to dispose of waste was
The following excerpt is from the financial statements of a large Canadian manufacturer and provides segmented geogThe company reported that it was engaged principally in one line of
You have completed your audit of Khim Inc. and its consolidated subsidiaries for the year ended December 31, 2020, and are satisfied with the results of your examination. You have examined the
Your firm has been engaged to examine the financial statements of Samson Corporation for the year 2020. The bookkeeper who maintains the financial records has prepared all the unaudited financial
In an examination of Daniel Corporation Ltd. as at December 31, 2020, you have learned that the following situations exist. No entries have been made in the accounting records for these items. Daniel
Robbins Ltd. is a wholesale distributor of professional equipment and supplies. The company's sales have averaged about $900,000 annually for the three-year period 2018 to 2020. The firm's total
The following information (in $000) has been obtained from Patinka Limited's financial statements for the fiscal years ended December 31. There were no preferred shares issued by Patinka nor
Tarzwell Limited is preparing some analysis of past financial performance and positions to include in the management discussion and analysis (MD&A) portion of the annual report to shareholders.
The condensed statement of changes in financial position and detailed income statement information (in $000) for Tran Consulting Ltd. follow. Tran contracts professionals in the electronic data
The financial statements of Mackay Corporation show the following information: Instructions a. Using horizontal analysis, analyze Mackay Corporation's change in liquidity, solvency, and
Jason Corporation completed, its board of directors authorized, and it issued its financial statements following IFRS for the year ended December 31, 2020, on March 10, 2021. The following events
Yuen Corporation shows the following financial position and results for the three years ended December 31, 2022, 2021, and 2020 (in thousands): Calculate the current ratio, quick ratio for each
The income statements of Dwayne Corporation show the following amounts: Using vertical (common-size) analysis, analyze Dwayne Corporation's declining profit before tax. Round answers to zero
The new auditor's report required under Canadian Auditing Standards highlights key audit matters. What does information on key audit matters provide to potential investors, and how do these matters
What is the difference between an auditor's unmodified opinion and a qualified opinion?
Nortel Networks experienced one of the most notorious Canadian bankruptcies. Eventually there was a distribution of funds obtained from selling off Nortel's assets, including intellectual property.
(a) Describe the major types of subsequent events. (b) Indicate how each of the following subsequent events would be reported (that is,(i) by adjusting the financial statements(ii) by
Tonoma Inc., a company that follows IFRS, is preparing its December 31, 2020 financial statements. The following two events occurred after December 31, 2020: (1) A flood loss of $80,000 occurred on
The following information was described in a note of Cruton Packing Co., a public company that follows IFRS: “During August, Bigelow Products Corporation purchased 212,450 of the Company's common
How does seasonality affect interim reporting and how should companies overcome the seasonality problem? Is there more of an effect on interim reporting for companies following IFRS or ASPE?
Maleki Enterprises Ltd. follows ASPE and states in its financial statement notes: “The company and its subsidiaries have long-term leases expiring on various dates after December 31, 2020. Amounts
Corby Spirit and Wine Limited is a leading Canadian marketer and distributor of premium spirits and wine brands. Obtain a copy of the company's comparative financial statements for the year ended
AltaGas Ltd. capitalizes on the supply and demand dynamic for natural gas and power by owning and operating assets in gas, power, and utilities in places that provide a strategic competitive
Access the financial statements of Bombardier Inc. for the years ended December 31, 2017 and 2016, from the company's website or SEDAR (www.sedar.com). Instructions Changes in non-cash
Hudson's Bay Company's financial statements for its year ended February 3, 2018 (fiscal 2017) can be found at the end of this volume or on the company website. HBC is a global retailer with
Seneca Corporation, which uses IFRS, has contracted with you to prepare a statement of cash flows. The controller has provided the following information: Additional information related to 2020
MFI Holdings Inc. follows IFRS and applies the FV-OCI model with recycling and has adopted the option to show dividends received as operating activities. MFI's SFP contained the following comparative
Neilson Corp. reported $245,000 of net income for 2020. In preparing the statement of cash flows, the accountant noted several items that might affect cash flows from operating activities. 1.
Gao Limited, a publicly traded company, uses IFRS and had the following events and transactions occur in its fiscal year ended October 31, 2020. Although no dates are given, the events described are
Comparative SFP accounts of Jensen Limited, which follows IFRS, appear below: Additional information: 1. Equipment that cost $10,000 and was 40% depreciated was sold in 2020. 2. Cash
The comparative SFP for Cosky Corporation follows: Additional information: 1. Dividends of $15,000 were declared and paid in 2020. 2. There were no unrealized gains or losses on the
The following transactions took place during the year 2020 for Mia Inc. 1. Convertible bonds payable with a carrying amount of $300,000 along with conversion rights of $9,000 were exchanged for
Shen Limited reported net income of $32,000 for its latest year ended March 31, 2020. Instructions For each of the five different situations involving the SFP accounts that follow,
The following are transactions of Albert Sing, an interior design consultant, for the month of September 2020. Sept. 1 Albert Sing began business as an interior design consultant, investing
Huang Corp. uses the direct method to prepare its statement of cash flows and follows IFRS. Huang's trial balances at December 31, 2020 and 2019, were as follows: Additional information: 1.
Data for Malouin Corp. are presented in E22.12. Instructions Prepare the operating activities section of the statement of cash flows using the indirect method. Data From
Tobita Limited, which follows IFRS, has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. Condensed financial data for 2020 and 2019
Information from the statement of financial position and statement of income is given below for North Road Inc., a company following IFRS, for the year ended December 31. North Road has adopted the
Guas Inc., a major retailer of bicycles and accessories, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative
Tuit Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2020: Additional information: 1. Dividends on common shares in the amount of
The following are the transactions from Izzy Inc. concerning its allowance for doubtful accounts. 1. Write off of accounts receivable........................$5,000 2. Recovery of accounts
Malouin Corp.'s income statement for the year ended December 31, 2020, had the following condensed information: Instructions a. Prepare the operating activities section of the statement of
The following selected account balances are taken from the financial statements of Mandrich Inc. at its calendar year end prepared using IFRS: At December 31, 2020, the following information is
Each of the following items must be considered in preparing a statement of cash flows (indirect method) for Bastille Inc., which follows IFRS, for the year ended December 31, 2020. 1. Equipment
MacAskill Mills Limited follows IFRS, has a calendar year end, and adopted the policy of classifying interest paid as financing activities. It engaged in the following transactions in 2020. 1.
The following accounts appear in the ledger of Tanaka Limited, which uses IFRS, and has adopted the policy of classifying dividends paid as operating activities: Instructions Show how the
The following selected account balances were taken from the financial statements of Blumberg Inc. concerning its long-term investment in shares of Black Inc. over which it has had significant
Angus Farms Ltd., which follows ASPE, had the following transactions during the fiscal year ended December 31, 2020. 1. On May 1, a used tractor was sold at auction. The information concerning this
The following are selected statement of financial position accounts of Pavicevic Ltd. at December 31, 2019 and 2020, and the increases or decreases in each account from 2019 to 2020. Also presented
Strong House Inc. had the following condensed statement of financial position at December 31, 2019: Strong House Inc. follows IFRS and chooses to classify dividends paid as financing activities
Indicate in general journal form how the following items would be entered in a work sheet to prepare the statement of cash flows where payments for dividends are classified as financing activities.
Yang Inc. reports under IFRS and has adopted the policy of classifying interest received as an investing activity. During 2020, Yang lent $30,000 to a key supplier in exchange for a two-year
In 2020, Oswald Corporation reported a net loss of $56,000. Oswald's only net income adjustments were depreciation expense of $67,000 and an increase in accounts receivable of $8,100. Calculate
October Corporation reported net income of $46,000 in 2020. Depreciation expense was $17,000 and unrealized losses on FV-NI investments were $3,000. The following accounts changed as indicated in
Kamsky Inc., which follows IFRS, had the following balances and amounts on its comparative financial statements at year end: (a) Calculate income taxes paid in 2020 and discuss the related

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