Questions and Answers of Intermediate Accounting Volume 1

On January 1, 2020, Wolfgang Ltd. paid $1,000 for the option to buy 5,000 of its common shares for $25 each. The contract stipulates that it may be settled only by exercising the option and buying
On April 1, 2020, Petey Ltd. paid $175 for a call to buy 700 shares of NorthernTel at a strike price of $27 per share any time during the next six months. The market price of NorthernTel's shares was
Refer to BE16.4. Assume the same facts except that the forward contract is a futures contract that trades on the Futures Exchange. Ginseng Inc. was required to deposit $30 with the stockbroker as a
On January 2, 2020, Jackson Corporation purchased a call option for $500 on Walter's common shares. The call option gives Jackson the option to buy 1,000 shares of Walter at a strike price of $30 per
On January 1, 2020, Ginseng Inc. entered into a forward contract to purchase U.S. $6,000 for $6,336 Canadian in 30 days. On January 15, the fair value of the contract was $40 (reflecting the present
Brondon Corp. purchased a put option on Mykia common shares on July 7, 2020, for $480. The put option is for 350 shares, and the strike price is $50. The option expires on January 31, 2021. The
Refer to E16.2. Assume the same facts except that the forward contract is a futures contract that trades on the Futures Exchange. On January 1, 2020, Roper is required to deposit $65 with the
On February 1, 2020, Daily Produce Ltd. entered into a purchase commitment contract to buy apples from Farmers Corporation. According to the contract, Daily Produce could settle the contact on a net
Access the financial statements of Brookfield Asset Management for the year ended December 31, 2017. The full set of its annual financial statements can be found on SEDAR at www.sedar.com or on the
CopMin Inc. is a private enterprise that is involved in copper mining operations. The company currently owns two operating mines. It is January 1, 2020, and CopMin has recently entered into two types
Refer to P16.1, but assume that Hing Wa wrote (sold) the call option for a premium of $480 (instead of buying it). Assume that the market price of the shares and the fair value of the option are
On January 1, 2020, Roper Inc. agrees to buy 3 kg of gold at $40,000 per kilogram from Golden Corp on April 1, 2020, but does not intend to take delivery of the gold. On the day that the contract was
Access the annual report of Canadian Tire Corporation for its year ended December 31, 2017, from the company's website or SEDAR (www.sedar.com). According to Note 1 to the financial statements, the
The treasurer of Hing Wa Corp. has read on the Internet that the stock price of Ewing Inc. is about to take off. In order to profit from this potential development, Hing Wa purchased a call option on
Sometimes an entity issues financial instruments that require settlement using its own shares. Examples of these include purchased or written options to buy or sell its own shares, or forward
Solid Gold Corporation is a public company that produces and sells gold. As the controller, you are worried that the company's profits will be hurt if gold prices decline. You are interested in doing
RIT Co. has an investment of 5,000 shares in a public company, SIT Ltd. In October 2020, RIT Co. purchased 5,000 put options for SIT Ltd. shares at a price of $2 per put option. The strike price
Access the financial statements of Saskatoon-based Potash Corporation of Saskatchewan Inc. for its year ended December 31, 2017, from SEDAR (www.sedar.com). PotashCorp was a well-known Canadian
The following account balances are available from the ledger of Yutao Shui Corporation on December 31, 2019: Common Shares (20,000 shares authorized and outstanding)
Brubacher Corporation's post-closing trial balance at December 31, 2020, was as follows: At December 31, 2020, Brubacher had the following numbers for its common and preferred shares: The
Use the information for Kindey Corporation from BE15.15. Assume instead that Kindey declared a 1-for-5 reverse stock split, and answer the same questions. Data From BE15.15.Kindey Corporation
Radford Corporation's charter authorized 1 million $11 par value common shares, and 300,000 6% cumulative and non-participating preferred shares, with a par value of $100 per share. The corporation
On January 1, 2020, Copeland Ltd. (a public company) had the following shareholders' equity accounts: Preferred shares, $5 non-cumulative, unlimited number authorized, none
Gateway Corporation has outstanding 200,000 common shares that were issued at $10 per share. The balances at January 1, 2020, were $21 million in its Retained Earnings account; $4.3 million in its
Miss M's Dance Studios Ltd. is a public company, and accordingly uses IFRS for financial reporting. The corporate charter authorizes the issuance of an unlimited number of common shares and 50,000
The shareholders' equity accounts of Abbasi Inc. have the following balances on December 31, 2020: Common shares,400,000 shares issued and
Martinez Ltd. has the following equity accounts at January 1, 2020. Preferred shares outstanding: 2,500 shares $ 62,500 Common shares outstanding: 4,000 shares 400,000 (a) What was the average
The common shares of Hoover Inc. are currently selling at $143 per share. The directors want to reduce the share price and increase the share volume before making a new issue. The per share carrying
Laurentian Mills Ltd. had the following shareholders' equity at January 1, 2020. The contributed surplus accounts arose from amounts received in excess of the par value of the shares when
The books of Binkerton Corporation carried the following account balances as at December 1,
The following data were taken from the SFP accounts of Bedard Corporation on December 31, 2020: Current assets......................................................$1,040,000 FV-NI
The following is the shareholders' equity section of Suozzi Corp. at December 31, 2020: Preferred shares,a authorized 100,000 shares; issued 25,000 shares ..........................$
Spencer Limited has 50,000 common shares outstanding, with an average issue price per share of $8. On August 1, 2020, the company reacquired and cancelled 600 shares at $40 per share. There was
Higgins Inc. has 52,000 common shares outstanding. The shares have an average cost of $21 per share. On July 1, 2020, Higgins reacquired 800 shares at $56 per share and retired them. Assume no
Original Octave Inc. (OOI) is a widely held, publicly traded company that designs equipment for tuning musical instruments. Information about its shareholders' equity is as follows. The
Access the audited annual financial statements of Rogers Sugar Inc. for the year ended September 30, 2017, from SEDAR (www.sedar.com) or the company's website. Instructions a. Identify the
Stellar Corp. had the following shareholders' equity on January 1, 2020: Common shares, unlimited number authorized,.............$ 270,000 100,000 shares issued and
McNamara Limited's ledger shows the following balances on December 31, 2020: Preferred shares outstanding: 25,000 shares.............$ 625,000 Common shares outstanding: 40,000
The outstanding share capital of Meadowcrest Corporation consists of 3,000 preferred shares and 7,000 common shares for which $280,000 was received. The preferred shares carry a dividend of $7 per
As at December 31, 2019, Cayenne Ltd., a public company, had 40,000 common shares outstanding. During 2020, Cayenne had the following transactions. Issued 6,000 common shares at $29 per share, less
Companies around the globe have moved to, or are in the process of moving to, IFRS. Evidence has shown that it is preferable to adopt IFRS in its entirety, with no deviations from the standards. This
Manitoba Deck System Corporation (MDSC) is a public company whose shares are actively traded on the Toronto Stock Exchange. The following transactions occurred in 2020: Jan. 1 The company was
Callaghan Inc. decided to sell shares to raise additional capital so that it could expand into the rapidly growing service industry. The corporation chose to sell these shares through a subscription
Refer to the financial statements and accompanying notes of Canadian Tire Corporation Limited, for its year ended December 31, 2017. The financial statements are available on SEDAR
Wind and Solar Inc. (WSI) is in the business of providing electricity. The company started up in 2019. Currently, it is owned by Winifred Wind and Winston Chang. Both Winston and Winifred own 50% of
The Bank of Montreal and Royal Bank of Canada financial statements for their years ended October 31, 2017, can be found on SEDAR (www.sedar.com). Instructions a. What is the average
Yang Inc. was organized on January 1, 2020. It is authorized to issue an unlimited number of common shares and 100,000 preferred shares with a $4 dividend. The following share transactions were
At December 31, 2020, Reddy Inc. has three long-term debt issues outstanding. The first is a $2.2-million note payable that matures on June 30, 2023. The second is a $4- million bond issue that
The following items are found in Bogdan Limited's financial statements: 1. Interest expense (debit balance) 2. Loss on restructuring of debt 3. Mortgage payable (payable in full in
The following are various accounts: 1. Bank loans payable of a winery, due March 10, 2024 (the product requires aging for five years before it can be sold) 2. $10 million of serial bonds
Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31, 2020. The note was issued at par. Because Vargo is in financial trouble, First Trust Inc. agrees to extend
Assume the same information as in E14.24 and answer the following questions related to Green Bank (the creditor). Green Bank prepares financial statements in accordance with IFRS 9. There is no
On December 31, 2020, Green Bank enters into a debt restructuring agreement with Troubled Inc., which is now experiencing financial trouble. The bank agrees to restructure a $2-million, 12% note
Strickland Inc. owes Heartland Bank $200,000 plus $18,000 of accrued interest. The debt is a 10-year, 10% note. During 2020, Strickland's business declined due to a slowing regional economy. On
On December 31, 2019, Mohr Inc. borrowed $81,241 from Par Bank, signing a $125,000, five-year, non–interest-bearing note. The note was issued to yield 9% interest. Unfortunately, during 2020 Mohr
Refer to E14.18 and Auburn Limited. Instructions Repeat the instructions of E14.18 assuming that Auburn Limited follows IFRS and uses the effective interest method. Provide an effective
Mazza Corp. owes Tsang Corp. a $110,000, 10-year, 10% note issued at par plus $11,000 of accrued interest. The note is due today, December 31, 2020. Because Mazza Corp. is in financial trouble, Tsang
On June 30, 2013, Auburn Limited issued 12% bonds with a par value of $800,000 due in 20 years. They were issued at 98 and were callable at 104 at any date after June 30, 2020. Because of lower
Gaming Inc. issued a debenture bond to Karamoutz Bank to finance new technology it developed. The debenture was for $500,000, issued at face value, with a 10-year term and interest payable at 10%.
Friedman Corporation had bonds outstanding with a maturity value of $500,000. On April 30, 2020, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these
Rocky Mountain Corp. currently has an issued debenture outstanding with Abbra Bank. The note has a principal of $2 million, was issued at face value, and interest is payable at 7%. The term of the
On June 30, 2020, Mosca Limited issued $4 million of 20-year, 13% bonds for $4,300,920, which provides a yield of 12%. The company uses the effective interest method to amortize any bond premium or
On January 1, 2020, Batonica Limited issued a $1.2-million, five-year, zero-interest-bearing note to Northern Savings Bank. The note was issued to yield 8% annual interest. Unfortunately, during 2020
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, 2020. The bonds pay interest on September 1 and
Refer to the information for Darby Corporation in E13.2. Instructions a. Prepare the journal entries for the payment of the notes at maturity. Assume no other accruals of interest were
Primeau Inc. pays its officers bonuses based on income. For 2020, the bonuses total $350,000 and are paid on February 15, 2021. Prepare Primeau's December 31, 2020 adjusting entry and the February
In the following two independent cases, the company closes its books on December 31: 1. Armstrong Inc. sells $2 million of 10% bonds on March 1, 2020. The bonds pay interest on September 1 and
Access the financial statements of Air Canada and WestJet Airlines Ltd. for their years ended December 31, 2017, through SEDAR (www.sedar.com) or the companies' websites. Review the financial
On January 1, 2020, Landlord Corporation acquired the following properties: 1. Investment property consisting of land and an apartment building in Toronto for $1.5 million. To finance this
Selected transactions on the books of Pfaff Corporation follow: May 1, 2020 Bonds payable with a par value of $700,000, which are dated January 1, 2020, are sold at 105 plus accrued interest.
On December 31, 2020, Faital Limited acquired a machine from Plato Corporation by issuing a $600,000, non–interest-bearing note that is payable in full on December 31, 2024. The company's credit
Two independent situations follow. 1. On January 1, 2020, Spartan Inc. bought land that had an assessed value of $390,000 at the time of purchase. A $600,000, non–interest-bearing note due on
Desrocher Ltd. issued an instalment note on January 1, 2020 (with a required yield of 9%) in exchange for land that it purchased from Safayeni Ltd. Safayeni's real estate agent had listed the land on
Thompson Limited, a private company with no published credit rating, completed several transactions during 2020. In January, the company bought under contract a machine at a total price of $1.2
Jeremiah Limited issued 10-year, 7% debentures with a face value of $2 million on January 1, 2013. The proceeds received were $1.7 million. The discount was amortized on the straight-line basis over
Foreman Inc. issued $800,000 of 20-year, 10% bonds on January 1, 2020, at 102. Interest is payable semi-annually on July 1 and January 1. The company follows ASPE and uses the straight-line method of
Foreman Inc. issued $800,000 of 10%, 20-year bonds on January 1, 2020, at 102. Interest is payable semi-annually on July 1 and January 1. Foreman Inc. uses the effective interest method of
Sports International had total debt of $500,000 and $750,000 as at December 31, 2020, and December 31, 2019, respectively, of which $100,000 and $150,000 was current. In addition, the company had
Ambrosia Limited has the following balances as at December 31, 2020: accounts payable and accrued liabilities $20,000, wages payable $15,000, bonus payable (due September 30, 2022) $15,000, and bonds
At December 31, 2020, Jelena Incorporated has a bond payable due September 1, 2021, with a carrying value of $1,200,000 (based on amortized cost) and a current value of $1,250,000. The interest
On January 1, 2020, Steinem Corporation established a special purpose entity to buy $1 million of accounts receivable from Steinem. Investors have invested in the special purpose entity to benefit
Lawrence Incorporated owes $100,000 to Ontario Bank Inc. on a two-year, 10% note due on December 31, 2020. The note was issued at par. Because Lawrence is in financial trouble, Ontario Bank agrees to
On January 1, 2020, Jamil Incorporated redeemed bonds prior to their maturity date of January 1, 2021. The face value of the bonds was $800,000, and the redemption was performed at 97. As at the
Hanson Incorporated issued $1 million of 7%, 10-year bonds on July 1, 2019, at face value. Interest is payable each December 31. The company has chosen to apply the fair value option in accounting
Travel In Style Limited issued $1,000,000 of 9% bonds on September 1, 2020, for $1,058,671. The term of the bonds is September 1, 2020, to September 1, 2028, with interest payable quarterly each
Assume that the bonds in BE14.15 were issued for $644,632 and the effective interest rate was 6%.(a) Prepare Quinton Corporation's journal entry for the January 1 issuance.(b) Prepare the company's
On January 1, 2020, Quinton Corporation issued $600,000 of 7% bonds that are due in 10 years. The bonds were issued for $559,229 and pay interest each July 1 and January 1. The company uses the
The City of Fram issued 100 bonds at their face value of $6,000 each plus accrued interest on June 1, 2020. The term of the bonds was January 1, 2020, to January 1, 2026, with interest payable
Assume that the bonds in BE14.11 were issued at 103. Assume also that Grenier Limited follows ASPE and records the amortization using the straight-line method. Prepare the journal entries related to
Grenier Limited issued $300,000 of 10% bonds on January 1, 2020. The bonds are due on January 1, 2025, with interest payable each July 1 and January 1. The bonds are issued at face value. Grenier
Watson Corporation issued $500,000 of 8%, 10-year bonds on January 1, 2020, at face value. The bonds require annual interest payments each December 31. Costs associated with the bond issuance were
Pflug Ltd. signed an instalment note on January 1, 2020, in settlement of an account payable of $40,000 owed to Mott Ltd. Pflug is able to borrow funds from its bank at 11%, whereas Mott can borrow
Brestovacki Corporation issued a $50,000, five-year, 5% note to Jernigan Corp. on January 1, 2020, and received a piece of equipment that normally sells for $38,912. The note requires annual interest
Sophia Incorporated issued a $105,000, five-year, zero-interest-bearing note to Angelica Corp. on January 1, 2020, and received $52,000 cash. Sophia uses the effective interest method.(a) Using (1) a
On May 1, 2020, Jadeja Corporation, a publicly listed corporation, issued $200,000 of five-year, 8% bonds, with interest payable semi-annually on November 1 and May 1. The bonds were issued to yield
On January 1, 2020, Offshore Corporation erected a drilling platform at a cost of $5,460,000. Offshore is legally required to dismantle and remove the platform at the end of its six-year useful life,
Crude Oil Limited purchased an oil tanker depot on July 2, 2020 at a cost of $600,000 and expects to operate the depot for 10 years. After the 10 years, Crude Oil is legally required to dismantle the
At December 31, 2020, 30 employees of Kasten Inc. have each earned one week of vacation time. The employees' average salary is $1,000 per week. Prepare Kasten's December 31, 2020 adjusting entry.
On May 1, 2020, Green Machine Inc. entered into a contract to deliver one of its specialty mowers to Schroeter Landscaping Co. The contract requires Schroeter to pay the contract price of $3,200 in
Laurin Corporation offers parental benefits to its staff as a top-up on EI benefits so that employees end up receiving 100% of their salary for a maximum of 12 months of parental leave. Ruzbeh Awad,

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