Questions and Answers of Intermediate Accounting Volume 1

Ciao Corporation had January 1 and December 31 balances as follows: For 2020, the cost of goods sold was $550,000. Calculate Ciao's 2020 cash paid to suppliers of inventory. 1/1/20 12/31/20
At January 1, 2020, Apex Inc., a private company following ASPE, had accounts receivable of $72,000. At December 31, 2020, the accounts receivable balance was $59,000. Sales revenue for 2020 was
Using the information from BE22.9 for Azure Ltd., (a) prepare the cash flows from operating activities section of Azure's 2020 statement of cash flows using the indirect method and following
Azure Ltd. had the following 2020 income statement data: Sales revenue.......................................................................$205,000 Cost of goods
Wong Textiles Ltd. entered into a lease obligation during 2020 to acquire a cutting machine. The amount recorded to the Right-of-Use Asset account and the corresponding Lease Liability account was
In 2020, Abbotsford Inc. issued 1,000 common shares for land with a fair market value of $149,000. a. Prepare Abbotsford's journal entry to record the transaction. b. Indicate the effect
Tang Corporation, which follows IFRS and chooses to classify dividends paid as financing activities and interest paid as operating activities on the statement of cash flows, had the following
Maddox Corporation had the following activities in 2020. 1. Sold land for $180,000. 2. Purchased an FV-NI investment in common shares for $15,000. 3. Purchased inventory for $845,000
Mullins Corp. reported the following items on its June 30, 2020 trial balance and on its comparative trial balance one year earlier: Determine the June 30, 2020 cash and cash equivalents amount
As at December 31, 2020, Bajac Inc. has the following balances: cash in bank, $108,000; investment in preferred shares (retractable, purchased by Bajac within 90 days of maturity date), $120,000;
Alvarado Ltd., a private company, has reported increasing profit every year for the past five years. Alvarado would like to expand operations by adding three retail stores within the next three
Access the financial statements of WestJet Airlines Limited for its year ended December 31, 2017, from SEDAR (www.sedar.com) or the company's website. Instructions Review the financial
The IASB regularly updates and publishes a project plan that outlines the timelines for the projects it is working on.Instructions Using the IASB website (www.ifrs.org), identify new standards
Refer to the specimen financial statements at the end of the book, which show excerpts from the 2017 year-end financial statements, including the accompanying notes, of Hudson's Bay Company. The full
Sunlight Equipment Manufacturers (SEM) makes barbecue equipment. The company has historically been very profitable; however, in the last year and a half, things have taken a turn for the worse due to
Bennett Corp., which began operations in January 2017, follows IFRS and is subject to a 30% income tax rate. In 2020, the following events took place: 1. The company switched from the
BBF Inc. owns a broadcast licence it purchased for $100,000, which is renewable every 10 years if BBF complies with regulatory requirements and provides an acceptable level of service to its
Dubois Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2020. Annual rental payments of $41,000 are to be made at the beginning of each lease
Matta Leasing Limited, which has a fiscal year end of October 31 and follows IFRS 16, signs an agreement on January 1, 2020, to lease equipment to Irvine Limited. The following information relates to
A lease agreement between Hebert Corporation and Russell Corporation is described in E20.3. Instructions Provide the following for Hebert Corporation, the lessor, rounding all numbers to
The following facts are for a non-cancellable lease agreement between Hebert Corporation and Russell Corporation, a lessee: The collectibility of the lease payments is reasonably predictable,
Use the information for Merrill Corporation from BE20.11. Assume that for Moxey Corporation, the lessor, collectibility is reasonably predictable, there are no important uncertainties concerning
Asset Ceiling Test IAS 19 Employee Benefits requires companies that have a surplus in a defined benefit plan to perform a “ceiling test” on the net benefit asset
Hass Foods Inc. sponsors a post-retirement medical and dental benefit plan for its employees. The company adopted the provisions of IAS 19 beginning January 1, 2020. The following balances relate to
Refer to the information for Rebek Corporation in E19.3. Instructions a. Prepare a pension work sheet: insert the January 1, 2020 balances and show the December 31, 2020 balances. b.
Rebek Corporation provides the following information about its defined benefit pension plan for the year 2020: Current service
Darrell Corporation reports under IFRS. At December 31, 2020, the company had a net deferred tax liability of $402,000. An explanation of the items that make up this balance
Zak Corp. purchased depreciable assets costing $600,000 on January 2, 2020. For tax purposes, the company uses CCA in a class that has a 40% rate. Assume these assets are considered “eligible
Lupasco Ltd. had the following 2020 income statement data: Revenues............$100,000 Expenses................60,000 ..............................$ 40,000 In 2020, Lupasco had
Peter M. Dell Co. purchased equipment for $510,000, which was estimated to have a useful life of 10 years with a residual value of $10,000 at the end of that time. Depreciation has been entered for
Rodriguez Corp. changed from the straight-line method of depreciation on its plant assets acquired in early 2018 to the double-declining-balance method in 2020 (before finalizing its 2020 financial
On January 1, 2016, Zui Corporation purchased a building and equipment that had the following useful lives, residual values, and costs: Building: 40-year estimated useful life, $50,000 residual
Oliver Inc. acquired the following assets in January 2017: Equipment: estimated useful life, 5 years; residual value, $15,000..........$465,000 Building: estimated useful life, 30 years; no
When the records of Hilda Corporation were reviewed at the close of 2020, the following errors were discovered. Instructions For each item, indicate by a check mark in the appropriate
The before-tax income for Hawks Corp. for 2019 was $101,000; for 2020, it was $77,400. However, the accountant noted that the following errors had been made: 1. Sales for 2019 included $38,200 that
Neilson Tool Corporation's December 31 year-end financial statements contained the following errors: An insurance premium of $66,000 covering the years 2019, 2020, and 2021 was prepaid in 2019,
A partial trial balance of Lindy Corporation at December 31, 2020, follows: Additional adjusting data: 1. A physical count of supplies on hand on December 31, 2020, totalled $3,400. Through
You have been engaged to review the financial statements of Walsh Corporation. While examining the work of the bookkeeper hired during the year that just ended, you noticed a number of irregularities
Tracy Ltd. purchased a piece of equipment on January 1, 2016, for $1.2 million. At that time, it was estimated that the machine would have a 15- year life and no residual value. On December 31, 2020,
Indicate the effect—understated (U), overstated (O), or no effect (NE)—that each of the following errors has on 2019 net income and 2020 net income: 2019 2020 Wages payable were not
For the past three years, Bonafacio Holdings Ltd. has held bonds as investments, which it accounted for using the amortized cost model. The bonds were purchased at a discount and are currently
Paudel Limited has been in the retail business for many years and has reached its goal in securing a strong financial position. The board of directors decided that it is time to adopt a policy of
Since incorporation in 2018, Ning Construction Inc. has accounted for its income from long-term construction contracts using the completed-contract method because this method is allowed by the Canada
Matusek Corporation has been experiencing a higher than expected number of warranty claims in the current year, due mainly to less than ideal product design. For this reason, the warranty expense
Corbeil Limited, a private company following ASPE, disposed of some assets during the fiscal year ended December 31, 2020. Based on the research done by the assistant controller, journal entries were
Joy Cunningham Co. purchased a machine on January 1, 2017, for $550,000. At that time, it was estimated that the machine would have a 10-year life and no residual value. On December 31, 2020, the
Wong Limited is a start-up company and has suffered a loss in the current year. Although it is confident that its expansion investment will pay off in the future, it decided to not claim any capital
The first audit of the books of Gomez Limited was recently carried out for the year ended December 31, 2020. Gomez follows IFRS. In examining the books, the auditor found that certain items had been
Bailey Corp. changed depreciation methods in 2020 from straight-line to double-decliningbalance because management gathered evidence that the assets were being used differently than previously
Pace Instrument Corp., a small company that follows ASPE, began operations on January 1, 2017, and uses a periodic inventory system. The following net income amounts were calculated for Pace under
Quinlan Corporation purchased Equipment for $60,000 on January 1, 2018. It was depreciated based on a seven-year life and an $18,000 residual value. On January 1, 2020, Quinlan revised these
Golden Properties Corporation purchased a parcel of land in March 2019 for $1 million with the intent to construct a building on the property in the near future. At the time of purchase, Golden
Noland Corporation decided at the beginning of 2020 to change from the declining-balance method of depreciating its capital assets to the straight-line method because the straight-line method better
Sharma Corporation has decided that, in preparing its 2020 financial statements under IFRS, two changes should be made from the methods used in prior years: 1. Depreciation. Sharma has used the
On December 31, 2020, before the books were closed, management and the accountant at Flanagan Inc. made the following determinations about three depreciable assets. 1. Depreciable asset A
Linden Corporation started operations on January 1, 2012, and has used the FIFO cost formula since its inception. In 2021, it decides to switch to the weighted average cost formula. You are provided
At January 1, 2020, Baker Corp. reported retained earnings of $2 million. In 2020, Baker discovered that 2019 depreciation expense was understated in error by $500,000. In 2020, net income was
Merrick Inc. follows IFRS and is adjusting and correcting its books at the end of 2020. In reviewing its records, the following information has been compiled: 1. In 2020, the depreciation method
In 2020, Dody Corporation discovered that equipment purchased on January 1, 2018, for $145,000 was expensed in error at that time. The equipment should have been depreciated over five years, with no
You are the auditor of Maglite Services Inc., a privately owned full-service cleaning company following ASPE. It is undergoing its first audit for the period ended September 30, 2020. The bank has
Yates Manufacturing Ltd. is preparing its year-end financial statements. Yates is a private enterprise. The controller, Theo Kimbria, is confronted with several decisions about statement presentation
As at December 31, 2020, Kendrick Corporation is having its financial statements audited for the first time ever. The auditor has found the following items that might have an effect on previous
Talbert Inc., which uses a periodic system, changed from the weighted average cost formula to the FIFO cost formula in 2020. The increase in the prior year's income before tax as a result of this
Holtzman Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to
Field Corp.'s controller was preparing the adjusting entries for the company's year ended December 31, 2020, when the V.P. Finance called him into her office. “Jean-Pierre,” she said, “I've
Leader Enterprises Ltd. follows IFRS and has provided the following information: 1. In 2019, Leader was sued in a patent infringement suit, and in 2020, Leader lost the court case. Leader must
In 2019, Bergeron Construction Company Ltd. applied the completedcontract method of accounting for long-term construction contracts. However, in 2020, Bergeron discovered that the
At the beginning of 2020, Armstead Corporation discovered that depreciation expense in the years prior to 2020 was incorrectly calculated and recorded. For the years before 2020, total depreciation
At a recent conference on financial accounting and reporting, three participants provided examples of similar accounting changes that they had encountered in the past few months. They all involved
Nadeau Company, a small company following ASPE, is adjusting and correcting its books at the end of 2020. In reviewing its records, it compiles the following information. 1. Nadeau has failed to
On October 30, 2020, Truttman Corp. sold a five-year-old building with a carrying value of $10 million at its fair value of $13 million and leased it back. There was a gain on the sale. Truttman pays
Use the information provided in BE20.22 about Lessee Corp. Assume that title to the property will not be transferred to Lessee by the end of the lease term and that there is also no bargain purchase
The head office of North Central Ltd. has operated in the western provinces for almost 50 years. North Central uses ASPE. In 2004, new offices were constructed on the same site at a cost of $9.5
Lessee Corp. agreed to lease property from Lessor Corp. effective January 1, 2020, for an annual payment of $30,877, beginning January 1, 2020. The property is made up of land with a fair value of
Rancour Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2020, it signed a 15-year lease with its Municipal Industrial Commission (MIC). The
On January 1, 2020, Animation Ltd., which uses ASPE, sold a truck to Letourneau Finance Corp. for $65,000 and immediately leased it back. The truck was carried on Animation’s books at $53,000, net
On September 15, 2020, Local Camping Limited, the lessee, entered into a 20-year lease with Sullivan Corp. to rent a parcel of land at a rate of $30,000 per year. Both Local and Sullivan use ASPE.
On January 1, 2020, Clark Inc. sold a piece of equipment to Daye Ltd. for $200,000, and immediately leased the equipment back. At the time, the equipment was carried on Clark’s books at a cost of
Presented below are five independent situations. All the companies involved use ASPE, unless otherwise noted. 1. On December 31, 2020, Zarle Inc. sold equipment to Orfanakos Corp. and immediately
Use the information for Regina Corporation from BE20.16. Assume instead that the residual value is not guaranteed. Prepare Regina’s May 29, 2020 journal entries. Round to the nearest
Fram Fibreglass Corp. (FFC) is a private New Brunswick company, using ASPE, that manufactures a variety of fibreglass products for the fishing and food services industry. With the traditional fishery
On January 1, 2020, Hein Corporation sold equipment to Liquidity Finance Corp. for $720,000 and immediately leased the equipment back. Both Hein and Liquidity use ASPE. Other relevant information is
Pucci Corporation is a machinery dealer whose shares trades on the TSX, and so it uses IFRS 16. Pucci leased a machine to Ernst Ltd. on January 1, 2020. The lease is for a six-year period and
On January 1, 2020, Quong Corporation (the lessee) entered into a four-year, non-cancellable equipment lease contract with Zareiga Inc. (the lessor). The PV of the minimum lease payments required was
Wong Inc., the lessee entered into two leases on July 1, 2020 with Pomerleau Corp. Both companies are public corporations following IFRS. The leases are for a large auger and a jackhammer that will
Regina Corporation, which uses ASPE, manufactures replicators. On May 29, 2020, it leased to Barnes Limited a replicator that cost $265,000 to manufacture and usually sells for $410,000. The lease
Use the information for Lai Corporation from BE20.14. Assume that, instead of costing Lai $175,000, the equipment was manufactured by Lai at a cost of $137,500 and the equipment’s regular selling
Lai Corporation, which uses ASPE, leased equipment it had specifically purchased at a cost of $175,000 for Swander, the lessee. The term of the lease is six years, beginning January 1, 2020, with
Use the information for Merrill Corporation from BE20.11 and the information that you gathered while solving BE20.11 and BE20.12. Prepare a schedule contrasting the journal entries prepared using a
Lee Industries Inc. and Lor Inc. enter into an agreement that requires Lor Inc. to build three dieselelectric engines to Lee’s specifications. Both Lee and Lor follow ASPE and have calendar year
Use the information for Merrill Corporation from BE20.11. Assume that a residual value of $17,000 is expected at the end of the lease, but that Merrill does not guarantee the residual value. Using(1)
At the end of the December 31, 2019 fiscal year, Yin Trucking Corporation, which follows IFRS 16, negotiated and closed a long-term lease contract for newly constructed truck terminals and freight
On September 1, 2020, Wong Corporation, which uses ASPE, signed a five-year, non-cancellable lease for a piece of equipment. The terms of the lease called for Wong to make annual payments of $13,668
Merrill Corporation, which uses ASPE, enters into a six-year lease of equipment on September 1, 2020, that requires six annual payments of $28,000 each, beginning September 1, 2020. In addition,
Assume the same information as in P20.9. Instructions Answer the following questions, rounding all numbers to the nearest dollar. a. Assuming that Woodhouse Leasing Corporation’s
You are a senior auditor auditing the December 31, 2020 financial statements of Hoang Inc., a manufacturer of novelties and party favours and a user of ASPE. During your inspection of the company
Assume the same information as in P20.9.Instructions Follow the instructions assuming that McKee Electronics follows IFRS 16. Data From P20.9.The following facts pertain to a
On January 1, 2020, Lavery Corp., which follows ASPE, leased equipment to Flynn Ltd., which follows IFRS 16. Both Lavery and Flynn have calendar year ends. The following information concerns this
Use the information for McCormick Ltd. from BE20.8. Assume that at December 31, 2020, McCormick made an adjusting entry to accrue interest expense of $8,296 on the lease. Prepare McCormick’s May 1,
The following facts pertain to a non-cancellable lease agreement between Woodhouse Leasing Corporation and McKee Electronics Ltd., a lessee, for a computer system: The collectibility of the

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