Questions and Answers of Intermediate Accounting Volume 2

Riley Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes:The tax rates listed were all enacted by the beginning of 2021. Riley reports under
Sorpon Corporation purchased equipment very late in 2023. Based on generous capital cost allowance rates provided in the Income Tax Act, Sorpon claimed CCA on its 2023 tax return but did not record
The following are independent items.1. The excess amount of a charge to the accounting records (allowance method) over a charge to the tax return for the writedown of inventory due to obsolescence2.
In 2023, Noshy Corporation had accounting income of $234,000 and taxable income of $184,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The
Brush Inc. recently purchased Paint Pro, a home-painting corporation. One of the terms of the merger was that, if Paint Pro’s net income for 2024 was $110,000 or more, 10,000 additional shares
Nilson Inc. had accounting income of $156,000 in 2023. Included in the calculation of that amount is the CEO’s life insurance expense of $5,000, which is not deductible for tax purposes. In
Myers Corp. purchased depreciable assets costing $30,000 on January 2, 2023. For tax purposes, the company uses CCA in a class that has a 30% rate. For financial reporting purposes, the company uses
Complete the following statements by filling in the blanks or choosing the correct answer in parentheses.a. In a period in which a taxable temporary difference reverses, the reversal will cause
The following are independent situations for Bramwell Corp.1. Estimated warranty costs (covering a three-year warranty) are expensed for financial reporting purposes at the time of sale but deducted
Jenny Corporation recorded warranty accruals as at December 31, 2023, in the amount of $150,000. This reversing difference will cause deductible amounts of $50,000 in 2024, $35,000 in 2025, and
At the end of 2022, Valerie Corporation reported a deferred tax liability of $41,000. At the end of 2023, the company had $241,000 of temporary differences related to property, plant, and equipment.
Mazur Corp. follows IFRS and began operations in 2023 and reported accounting income of $275,000 for the year. Mazur’s CCA exceeded its book depreciation by $40,000. Mazur’s tax rate for 2023 and
The accounting for the items in the numbered list that follows is commonly different for financial reporting purposes than it is for tax purposes.1. In the year of acquisition, for financial
Adelphi Corp. in its first year of operations has the following differences between its carrying amounts and the tax bases of its assets and liabilities at the end of 2023.It is estimated that the
At December 31, 2023, Watzman Inc. owned equipment that had a book value of $178,000 and a tax base of $136,000 due to the use of different depreciation methods for accounting and tax purposes. The
At December 31, 2023, Camille Corporation had an estimated warranty liability of $256,000 for accounting purposes and $0 for tax purposes. (The warranty costs are not deductible until they are paid.)
Sonia Corporation has historically followed ASPE, but is considering a change to IFRS. It has temporary differences at December 31, 2023, that result in the following SFP future tax accounts:Indicate
At December 31, 2022, Chai Inc. had a deferred tax asset of $40,000. At December 31, 2023, the deferred tax asset is $62,000. The corporation’s 2023 current tax expense is $70,000. What amount
At December 31, 2022, Ambuir Corporation had a deferred tax liability of $35,000. At December 31, 2023, the deferred tax liability is $52,000. The corporation’s 2023 current tax expense is $53,000.
At December 31, 2023, Tapper Corporation has a future tax asset of $420,000. After a careful review of all available evidence, it is determined that it is more likely than not that $85,000 of this
At December 31, 2022, Palden Corporation had a deferred tax asset of $800,000, resulting from future deductible amounts of $3.2 million and an enacted tax rate of 25%. In May 2023, new income tax
The accounting income (loss) figures for Farah Corporation are as follows:Accounting income (loss) and taxable income (loss) were the same for all years involved. Assume a 30% tax rate for 2018 and
Kyle Inc. incurred a net operating loss of $580,000 in 2023. Combined income for 2020, 2021, and 2022 was $460,000. The tax rate for all years is 30%. Prepare the journal entries to record the
Yen Inc.’s only temporary difference at the beginning and end of 2023 is caused by a $4.8-million deferred gain for tax purposes on an instalment sale of a plant asset. The related receivable (only
In 2023, Borovya Limited purchased shares of Gurvir Corp. at a cost of $52,000. This was the first time the company had ever acquired an investment to be accounted for at fair value through other
Sandeep Corporation had income before income tax of $230,000 in 2023. Sandeep’s current tax expense is $43,000 and deferred tax expense is $27,000.(a) Prepare Sandeep’s 2023 income statement,
Weiss Inc. reported income from continuing operations of $87,000 and a loss from discontinued operations of $16,000 in 2023, all before income taxes. All items are fully taxable and deductible for
Baker Company Limited (BCL) was founded in 2023. Its first year of operations turned out to be a good one, as far as start-up years go. The company not only broke even but actually showed a very
Josit Ltd. initiated a one-person pension plan in January 2015 that promises the employee a pension on retirement according to the following formula: pension benefit = 2.5% of final salary per year
The following facts apply to the pension plan of Yorke Inc. for the year 2023. Yorke applies ASPE.Instructionsa. Using a work sheet, calculate defined benefit expense for the year 2023, and provide
The following defined benefit pension data of Dahl Corp. apply to the year 2023:The company applies ASPE and has made an accounting policy choice to base its actuarial valuation of the DBO on the
The following is partial information related to Siri Ltd.’s non-pension, post-retirement health-care benefit plan at December 31, 2023:Instructions a. Prepare a schedule reconciling, to the extent
The following information is available for Antoine Corporation’s pension plan for the 2023 fiscal year:Defined benefit obligation, 1/1/23, accounting basis, beforeOn January 1, 2023, Antoine
Berstler Limited follows ASPE, and the company sponsors a defined benefit pension plan. Berstler’s actuary provides the following information about the plan (in thousands of dollars):Instructionsa.
Rosek Inc. provides the following information related to its post-retirement health-care benefits for the year 2023:Rosek follows IFRS.Instructionsa. Calculate the post-retirement benefit expense for
Rebek Corporation provides the following information about its defined benefit pension plan for the year 2023:Rebek follows IFRS.Instructionsa. Prepare a continuity schedule for 2023 for the defined
Opsco Corp. provides the following information about its post-retirement health-care benefit plan for the year 2023:Instructionsa. Assuming Opsco follows IFRS, calculate the post-retirement benefit
Griseta Limited sponsors a defined benefit pension plan for its employees, which it accounts for under ASPE. The following data relate to the operation of the plan for the year 2023:1. The actuarial
Legacy Corporation has the following information available concerning its post- retirement benefit plan for 2023:Assuming Legacy follows IFRS,(a) Calculate Legacy’s 2023 post-retirement benefit
The following information concerns Saverio Corp.’s defined benefit pension plan. On January 1, 2023, the company amended its pension plan, which resulted in a reduction in prior service benefits
The following information is available for Huntley Corporation’s pension plan for the year 2023:Instructionsa. Calculate defined benefit expense (also known as pension expense) for the year 2023,
Duster Corporation is a private company with a defined benefit pension plan. The following information is available for Duster for 2023:Assuming that Duster follows IFRS, determine the 2023 effect of
Ditek Corp. provides a defined contribution pension plan for its employees. The plan requires Ditek to contribute 5% of employees’ gross pay to a fund trustee each year. Ditek’s total payroll for
Saver Corporation ended its previous fiscal year with a defined benefit obligation of $137,888 and plan assets of $140,000. On January 1, 2023, the company amended its one-person defined benefit
Qui Importers provides the following pension plan information:InstructionsCalculate the actual return on the plan assets for 2023. Fair value of pension plan assets, January 1, 2023 Fair value of
Geoff Corp.’s operations in 2023 had mixed results. One division, Vincenti Group, again failed to earn income at a rate that was high enough to justify its continued operation, and management
Jonquière Corporation provides the following information about its defined benefit pension plan (in hundreds of thousands of dollars) for 2023:At the end of the year, Jonquière revised the terms of
Maya Corp. reports the following information (in hundreds of thousands of dollars) to you about its defined benefit pension plan for 2023:Provide a continuity schedule for the DBO for the year. Maya
At December 31, 2023, Glover Corporation provided you with the following information:Determine the account and its balance that should be reported on Glover’s December 31, 2023 balance sheet if it
Monday Corporation sponsors a defined benefit pension plan and reports under IFRS. On January 1, 2023, the company reported plan assets of $1,000 and a defined benefit obligation of $1,100 (all
At January 1, 2023, Rui Corporation had plan assets of $250,000 and a defined benefit obligation of the same amount based on projected costs. During 2023, the current service cost was $27,500, the
Petra Ltd. is preparing its financial statements for its year ended December 31, 2023, and has just obtained an actuarial pension valuation as at its year-end date. Prior to the actuarial valuation,
Kea Limited provides a defined contribution pension plan for its employees. The plan requires the company to deduct 5% of each employee’s gross pay for each payroll period as the employee
As the new accountant for Carly’s Pet Express Inc., a line of pet boutiques, you are developing the financial statement disclosures for the 2023 financial statement note on income taxes. The
Darrell Corporation reports under IFRS. At December 31, 2023, the company had a net deferred tax liability of $402,000. An explanation of the items that make up this balance follows:Instructionsa.
Tika Corp. has recently decided to implement a pension plan for its employees; however, it is unsure if it would like to structure the pension as a defined contribution plan or a defined benefit
Scott Enterprises Inc. sponsors a defined benefit plan for its 500 employees. On December 31, 2023, the company’s actuary provided the following information related to the plan: defined benefit
Roux Corp. had a Deferred Tax Asset account with a balance of $81,000 at the end of 2022 due to a single temporary difference of $270,000 related to warranty liability accruals. At the end of 2023,
Coa Corporation recently needed to find temporary inventory storage space when transitioning from an old factory to a newly built factory within the same city. Coa signed a 10-month lease on a
On September 1, 2023, 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
Yogendran Corp., which uses ASPE, leases a car to Jaimme DeLory on June 1, 2023. The term of the non-cancellable lease is 48 months. The following information is provided about the lease:1. The
Merrill Corporation, which uses ASPE, enters into a six-year lease of equipment on September 1, 2023, that requires six annual payments of $28,000 each, beginning September 1, 2023. In addition,
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, 2023, with
Matta Leasing Limited, which has a fiscal year end of October 31 and follows IFRS, signs an agreement on January 1, 2023, to lease equipment to Irvine Limited. The following information relates to
On January 1, 2023, Vick Leasing Inc., a lessor that uses IFRS, signed an agreement with Rock River Inc., a lessee, for the use of a compression system. The system cost $415,000 and Vick purchased it
Rancour Ltd., which uses ASPE, recently expanded its operations into an adjoining municipality, and on March 30, 2023, it signed a 15-year lease with its Municipal Industrial Commission (MIC). The
Pucci Corporation is a machinery dealer whose shares trades on the TSX, and so it uses IFRS. Pucci leased a machine to Ernst Ltd. on January 1, 2023. The lease is for a six-year period and requires
On January 1, 2023, 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
Wong Inc., the lessee, entered into two leases on July 1, 2023, 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, 2023, it leased to Barnes Limited a replicator that cost $265,000 to manufacture and usually sells for $410,000. The lease
On September 15, 2023, 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, 2023, 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
On January 1, 2023, 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
On January 1, 2023, 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
Cuomo Mining Corporation, a public company whose stock trades on the Toronto Stock Exchange, uses IFRS. The vice-president of finance has asked you, the assistant controller, to prepare the
On January 1, 2023, Lavery Corp., which follows ASPE, leased equipment to Flynn Ltd., which follows IFRS. Both Lavery and Flynn have calendar year ends. The following information concerns this
McCormick Ltd., a public company following IFRS, recorded a right-of- use asset and lease liability at $150,000 on May 1, 2023. The interest rate is 10%. McCormick made the first lease payment of
On January 1, 2023, Maleki Corp., which uses IFRS, signs a 10-year, non-cancellable lease agreement to lease a specialty lathe from Liu Inc. The following information concerns the lease agreement.1.
On January 1, 2024, Xu Ltd., which uses IFRS, entered into an eight-year lease agreement for a conveyor machine. Annual lease payments are $28,500 at the beginning of each lease year, which ends
You have just been hired as the new controller of SWT Services Inc., and you have been given two draft contracts with a note from the president of SWT. The note says, “Please help me to understand
Turcotte Limited, a public company following IFRS, decided to upgrade the coffee machines in all of its office locations. Turcotte leased 50 machines from Coffee Tyme Ltd. on July 1, 2023. (To
The first audit of the books of Gomez Limited was recently carried out for the year ended December 31, 2023. Gomez follows IFRS. In examining the books, the auditor found that certain items had been
Leader Enterprises Ltd. follows IFRS and has provided the following information:1. In 2022, Leader was sued in a patent infringement suit, and in 2023, Leader lost the court case. Leader must now pay
Merrick Inc. follows IFRS and is adjusting and correcting its books at the end of 2023. In reviewing its records, the following information has been compiled:1. In 2023, the depreciation method on
As at December 31, 2023, 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
Linden Corporation started operations on January 1, 2015, and has used the FIFO cost formula since its inception. In 2024, it decides to switch to the weighted average cost formula. You are provided
The head office of North Central Ltd. has operated in the western provinces for almost 50 years. North Central uses ASPE. In 2007, new offices were constructed on the same site at a cost of $9.5
Holtzman Company Limited is in the process of preparing its financial statements for 2023. Assume that no entries for depreciation have been recorded in 2023. The following information related to
Nadeau Company Limited, a small company following ASPE, is adjusting and correcting its books at the end of 2023. In reviewing its records, it compiles the following information.1. Nadeau has failed
Bennett Corp., which began operations in January 2020, follows IFRS and is subject to a 30% income tax rate. In 2023, the following events took place:1. The company switched from the zero-profit
In 2022, Bergeron Construction Company Ltd. applied the completed-contract method of accounting for long-term construction contracts. However, in 2023, Bergeron discovered that the
In 2023, Dody Corporation, which follows IFRS, discovered that equipment purchased on January 1, 2021, for $145,000 was expensed in error at that time. The equipment should have been depreciated over
Talbert Inc., which uses a periodic system, changed from the weighted average cost formula to the FIFO cost formula in 2023. The increase in the prior year’s income before tax as a result of this
Lessee Corp. agreed to lease property from Lessor Corp. effective January 1, 2023, for an annual payment of $30,877, beginning January 1, 2023. The property is made up of land with a fair value of
Field Corp.’s controller was preparing the adjusting entries for the company’s year ended December 31, 2023, when the vice-president of finance called him into her office.“Jean-Pierre,” she
At the beginning of 2023, Armstead Corporation discovered that depreciation expense in the years prior to 2023 was incorrectly calculated and recorded. For the years before 2023, total depreciation
On October 30, 2023, 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
A partial trial balance of Lindy Corporation at December 31, 2023, follows:Additional adjusting data:1. A physical count of supplies on hand on December 31, 2023, totalled $3,400. Through an
Maddox Corporation had the following activities in 2023:1. Sold land for $180,000.2. Purchased an FV-NI investment in common shares for $15,000.3. Purchased inventory for $845,000 with cash.4.
The following are selected statement of financial position accounts of Pavicevic Ltd. at December 31, 2022 and 2023, and the increases or decreases in each account from 2022 to 2023. Also presented

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