Questions and Answers of Intermediate Accounting Volume 2

Pace Instrument Corp., a small company that follows ASPE, began operations on January 1, 2020, and uses a periodic inventory system. The following net income amounts were calculated for Pace under
It is December 2023 and Wagner Inc. recently hired a new accountant, Jodie Larson. Although Wagner is a private company, it follows IFRS. As part of her preparation of the 2023 financial statements
Bayberry Corporation performs year-end planning in November each year before its fiscal year ends in December. The preliminary estimated net income following IFRS is $4.2 million. The CFO, Rita
The before-tax income for Hawks Corp. for 2022 was $101,000; for 2023, it was $77,400. However, the accountant noted that the following errors had been made:1. Sales for 2022 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 2022, 2023, and 2024 was prepaid in 2022, with
Quinlan Corporation purchased equipment for $60,000 on January 1, 2021. It was depreciated based on a seven-year life and an $18,000 residual value. On January 1, 2023, Quinlan revised these
The following are transactions of Albert Sing, an interior design consultant, for the month of September 2023.Sept. 1 Albert Sing began business as an interior design consultant, investing $31,000
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
Strong House Inc. had the following condensed statement of financial position at December 31, 2022:Strong House follows IFRS and chooses to classify dividends paid as financing activities and
Angus Farms Ltd., which follows ASPE, had the following transactions during the fiscal year ended December 31, 2023.1. On May 1, a used tractor was sold at auction. The information concerning this
Rodriguez Corp. changed from the straight- line method of depreciation on its plant assets acquired in early 2021 to the double-declining-balance method in 2023 (before finalizing its 2023 financial
Tuit Inc., a greeting card company that follows ASPE, had the following statements prepared as at December 31, 2023:Additional information:1. Dividends on common shares in the amount of $6,000 were
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, 2023, the following information is
Mullins Corp. reported the following items on its June 30, 2023 trial balance and on its comparative trial balance one year earlier:(a) Determine the June 30, 2023 cash and cash equivalents amount
Shen Limited reported net income of $32,000 for its latest year ended March 31, 2023.InstructionsFor each of the five different situations involving the SFP accounts that follow, calculate the cash
Oliver Inc. acquired the following assets in January 2020:Equipment: estimated useful life, 5 years; residual value, $15,000 $465,000Building: estimated useful life,
The following transactions took place during the year 2023 for Mia Inc.1. Convertible bonds payable with a carrying amount of $300,000 along with conversion rights of $9,000 were exchanged for common
Lupasco Ltd. had the following 2023 income statement data:In 2023, Lupasco had the following activity in selected accounts:Prepare Lupasco’s cash flows from operating activities section of the
On January 1, 2019, 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 value,
Huang Corp. uses the direct method to prepare its statement of cash flows and follows IFRS. Huang’s trial balances at December 31, 2023 and 2022, were as follows:Additional information:1. Huang
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
The following information (in ’000s) 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 were
Malouin Corp.’s income statement for the year ended December 31, 2023, had the following condensed information:There were no purchases or sales of trading (FV-NI) investments during
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 2023 and discuss the related disclosure
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 2023 and 2022
Watson Corporation, which uses IFRS, is using the indirect method to prepare its 2023 statement of cash flows and chooses to classify dividends paid as financing activities and interest paid as
Peter M. Dell Co. purchased equipment for $510,000 that 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
Azure Ltd. had the following 2023 income statement data:The following accounts increased during 2023 by the amounts shown: Accounts Receivable, $17,000; Inventory, $11,000; Accounts Payable (relating
The financial statements of Mackay Corporation show the following information:Instructionsa. Using horizontal analysis, analyze Mackay’s change in liquidity, solvency, and profitability in 2023.
October Corporation reported net income of $46,000 in 2023. Depreciation expense was $17,000 and unrealized losses on FV-NI investments were $3,000. The following accounts changed as indicated in
Franklin Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2023. Sales of
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, 2023.1. Equipment that
As at December 31, 2023, 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;
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
In 2023, 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 that the
Tarzwell Limited is preparing some analysis of past financial performance and positions to include in the MD&A portion of the annual report to shareholders. You have suggested that it would be
At January 1, 2023, Apex Inc., a private company following ASPE, had accounts receivable of $72,000. At December 31, 2023, the accounts receivable balance was $59,000. Sales revenue for 2023 was
Wong Textiles Ltd. entered into a lease obligation during 2023 to acquire a cutting machine. The amount recorded to the Right-of-Use Asset account and the corresponding Lease Liability account was
Yuen Corporation shows the following financial position and results for the three years ended December 31, 2025, 2024, and 2023 (in thousands):Calculate the current ratio, quick ratio for each year,
In 2023, 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
Yang Inc. reports under IFRS and has adopted the policy of classifying interest received as an investing activity. During 2023, Yang lent $30,000 to a key supplier in exchange for a two-year
You are compiling the consolidated financial statements for Vu Corporation International (VCI), a public company. The corporation’s accountant, Timothy Chow, has provided you with the following
Leopard Corporation is currently preparing its annual financial statements for the fiscal year ended April 30, 2023, following IFRS. The company manufactures plastic, glass, and paper containers for
In June 2024, the board of directors for Holtzman Enterprises Inc. authorized the sale of $10 million in corporate bonds. Michelle Collins, treasurer for Holtzman Enterprises, is concerned about the
In an examination of Daniel Corporation Ltd. as at December 31, 2023, you have learned that the following situations exist. No entries have been made in the accounting records for these items. Daniel
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, 2023. Amounts
Radiohead Inc., a private company following ASPE, produces electronic components for sale to manufacturers of radios, television sets, and digital sound systems. In connection with her examination of
You have completed your audit of Khim Inc. and its consolidated subsidiaries for the year ended December 31, 2023, and are satisfied with the results of your examination. You have examined the
Jason Corporation completed, its board of directors authorized, and it issued its financial statements following IFRS for the year ended December 31, 2023, on March 10, 2024. The following events
At December 31, 2023, 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
Noland Corporation decided at the beginning of 2023 to change from the declining-balance method of depreciating its capital assets to the straight-line method because the straight-line method better
The following data were taken from the SFP accounts of Bedard Corporation on December 31, 2023:InstructionsPrepare the required journal entries for the following unrelated events in January 2024:a. A
Laurentian Mills Ltd. had the following shareholders’ equity at January 1, 2023.The contributed surplus accounts arose from amounts received in excess of the par value of the shares when issued.
Spencer Limited has 50,000 common shares outstanding, with an average issue price per share of $8. On August 1, 2023, 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, 2023, Higgins reacquired 800 shares at $56 per share and retired them. Assume no
You have been assigned to examine the financial statements of Picard Corporation for the year ended December 31, 2023, as prepared following IFRS. Picard uses a periodic inventory system. You
Joy Cunningham Co. purchased a machine on January 1, 2020, 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, 2023, the
Bailey Corp. changed depreciation methods in 2023 from straight-line to double-declining- balance because management gathered evidence that the assets were being used differently than previously
Corbeil Limited, a private company following ASPE, disposed of some assets during the fiscal year ended December 31, 2023. Based on the research done by the assistant controller, journal entries were
On May 5, 2024, you were hired by Gavin Inc., a closely held company that follows ASPE, as a staff member of its newly created internal auditing department. While reviewing the company’s records
Since incorporation in 2021, 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
Jacobsen Corporation is negotiating a loan for expansion purposes. Jacobsen’s books and records have never been audited and the bank has requested that an audit be performed and that IFRS be
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
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
Kitchener Corporation has followed IFRS and used the accrual basis of accounting for several years. A review of the records, however, indicates that some expenses and revenues have been handled on a
Ali Reiners, the new controller of Luftsa Corp., is preparing the financial statements for the year ended December 31, 2023. Luftsa is a publicly traded entity and therefore follows IFRS. Ali has
Tracy Ltd. purchased a piece of equipment on January 1, 2019, 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, 2023,
You have been asked by a client to review the records of Inteq Corporation, a small manufacturer of precision tools and machines that follows ASPE. Your client is interested in buying the business,
Day and Night Cinemas was significantly affected by the COVID-19 pandemic. Several of its balances became highly uncertain and could not be predicted. Management continued to monitor and assess the
When the records of Hilda Corporation were reviewed at the close of 2023, the following errors were discovered.InstructionsFor each item, indicate by a check mark in the appropriate column whether
The condensed statement of changes in financial position and detailed income statement information (in ’000s) for Tran Consulting Ltd. follow. Tran contracts professionals in the electronic data
On January 1, 2023, Manfred Manufacturers had 300,000 common shares outstanding. On April 1, the corporation issued 30,000 new common shares to raise additional capital. On July 1, the corporation
On January 1, 2023, Logan Limited had shares outstanding as follows:6% cumulative preferred shares, $100 par value, 10,000 shares issued and outstanding $1,000,000Common shares, 200,000 shares issued
Hedley Corporation had 2023 net income of $1.4 million. During 2023, Hedley paid a dividend of $5 per share on 100,000 preferred shares. Hedley also had 220,000 common shares outstanding during the
Audrey Inc. has 1 million common shares outstanding as at January 1, 2023. On June 30, 2023, 4% convertible bonds were converted into 100,000 additional shares. Up to that point, the bonds had paid
The 2023 income statement of Tanel Corporation showed net income of $860,000, which included a loss from discontinued operations of $140,000. Tanel had 25,000 common shares outstanding all year.(a)
Koala Inc., a publicly traded company, had 210,000 common shares outstanding on December 31, 2022. During 2023, the company issued 8,000 shares on May 1 and retired 14,000 shares on October 31. For
Condensed data from the comparative SFP of Legros Inc. follow:a. Using vertical (common-size) analysis, calculate the various SFP categories as a percentage of total assets for Legros for each of
The income statements of Dwayne Corporation show the following amounts:Using vertical (common-size) analysis, analyze Dwayne’s declining profit before tax. Round answers to zero decimal places. Net
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 from 2021 to 2023. The firm’s
Tonoma Inc., a company that follows IFRS, is preparing its December 31, 2023 financial statements. The following two events occurred after December 31, 2023: (1) A flood loss of $80,000 occurred
The following are quarter-end balances of Current Assets and Current Liabilities for Abel Inc.(a) In Excel, use a pivot table and insert a calculated field to calculate the current ratio.(b)
Two independent situations follow:1. On January 1, 2023, Divac Limited issued $300,000 of 10-year, 9% bonds at par. Interest is payable quarterly on April 1, July 1, October 1, and January 1.2. On
Access the financial statements for Loblaw Companies Limited for the year ended January 2, 2021, and for Empire Company Limited for the year ended May 2, 2020, through SEDAR (www.sedar.com) and then
Access the financial statements of Air Canada for the year ended December 31, 2020, through SEDAR (www.sedar.com) or the company’s website. Review the financial statements, including the notes, and
Lamanna Laundry Ltd. is a full-service laundry provider, focusing on high-end clientele. Lamanna Laundry has recently invested in new technology to improve efficiency. To finance the new technology,
At December 31, 2022, Shutdown Manufacturing Limited had outstanding a $300,000, 12% note payable to Thornton National Bank. Dated January 1, 2020, the note was issued at par and due on December 31,
Brestovacki Corporation issued a $50,000, five-year, 5% note to Jernigan Corp. on January 1, 2023, and received a piece of equipment that normally sells for $38,912. The note requires annual interest
On December 31, 2023, 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
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%.
On April 1, 2023, Taylor Corp. sold 12,000 of its $1,000 face value, 15-year, 11% bonds at 97. Interest payment dates are April 1 and October 1. The company follows ASPE and uses the straight-line
Desrocher Ltd. issued an instalment note on January 1, 2023 (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 June 30, 2023, 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, 2023, Osborn Inc. sold 12% bonds having a maturity value of $800,000 for $860,652, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2023, and mature on
Four independent situations follow.1. Wen Corporation incurred the following costs when it issued bonds: printing and engraving costs, $25,000; legal fees, $69,000; and commissions paid to
On January 1, 2023, 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
Collins Corporation bought a computer on December 31, 2023, paying $30,000 down with a further $75,000 payment due on December 31, 2026. An interest rate of 10% is implicit in the purchase price.
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, 2023. Because Mazza is in financial trouble, Tsang
Grenier Limited issued $300,000 of 10% bonds on January 1, 2023. The bonds are due on January 1, 2028, 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, 2023, at face value. The bonds require annual interest payments each December 31. Costs associated with the bond issuance were

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