Questions and Answers of Intermediate Accounting Volume 2

The City of Fram issued 100 bonds at their face value of $6,000 each plus accrued interest on June 1, 2023. The term of the bonds was January 1, 2023, to January 1, 2029, with interest payable
Minor Inc. sells 10% bonds having a maturity value of $3 million for $2,783,713. The bonds are dated January 1, 2023, and mature on January 1, 2028. Interest is payable annually on January
Cinderella Shoes Inc., a private company following ASPE, is having difficulty meeting its working capital requirements. As a result, on January 1, 2023, the company sold bonds with a face value of $1
On December 31, 2022, 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 2023 Mohr
Travel In Style Limited issued $1,000,000 of 9% bonds on September 1, 2023, for $1,058,671. The term of the bonds is September 1, 2023, to September 1, 2031, with interest payable quarterly each
On January 2, 2018, Kowalchuk Corporation, a small company that follows ASPE, issued $1.5 million of 10% bonds at 97 due on December 31, 2027. Legal and other costs of $110,000 were incurred in
Hanson Incorporated issued $1 million of 7%, 10-year bonds on July 1, 2022, at face value. Interest is payable each December 31. The company has chosen to apply the fair value option in accounting
On June 30, 2016, 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, 2023. Because of lower
You are a senior analyst at Canada Wheels Corp. You have been given the information below and have been asked to do the following by your manager:(a) Calculate the debt to total assets ratio from
Friedman Corporation had bonds outstanding with a maturity value of $500,000. On April 30, 2023, when these bonds had an unamortized discount of $10,000, they were called in at 104. To pay for these
On January 1, 2023, Jamil Incorporated redeemed bonds prior to their maturity date of January 1, 2024. The face value of the bonds was $800,000, and the redemption was performed at 97. As at the
Vargo Limited owes $270,000 to First Trust Inc. on a 10-year, 12% note due on December 31, 2023. The note was issued at par. Because Vargo is in financial trouble, First Trust agrees to extend the
Ambrosia Limited has the following balances as at December 31, 2023: accounts payable and accrued liabilities $20,000, wages payable $15,000, bonus payable (due September 30, 2025) $15,000, and bonds
Lawrence Incorporated owes $100,000 to Ontario Bank Inc. on a two-year, 10% note due on December 31, 2023. The note was issued at par. Because Lawrence is in financial trouble, Ontario Bank agrees to
At December 31, 2023, Jelena Incorporated has a bond payable due September 1, 2024, with a carrying value of $1,200,000 (based on amortized cost) and a current value of $1,250,000. The interest
Sports International had total debt of $500,000 and $750,000 as at December 31, 2023, and December 31, 2022, respectively, of which $100,000 and $150,000 was current. In addition, the company had
On January 1, 2023, 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
Yang Inc. was organized on January 1, 2023. 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
As climate change continues to affect our environment, we have seen increasing incidence of wildfires, flooding, and hurricanes. Financial instruments such as catastrophe bonds have also emerged.
Foreman Inc. issued $800,000 of 10%, 20-year bonds on January 1, 2023, at 102. Interest is payable semi-annually on July 1 and January 1. Foreman uses the effective interest method of amortization
The following are various accounts:1. Bank loans payable of a winery, due March 10, 2027 (the product requires aging for five years before it can be sold)2. $10 million of serial bonds payable, of
Samwall Ltd. needed funding to bridge the gap between paying its suppliers and collecting its receivables. As such, Samwall issued a $300,000, four-year, 8% note at face value to Easy Loan Bank on
Foreman Inc. issued $800,000 of 20-year, 10% bonds on January 1, 2023, at 102. Interest is payable semi-annually on July 1 and January 1. The company follows ASPE and uses the straight-line method of
On January 1, 2023, 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
Sophia Incorporated issued a $105,000, five-year, zero interest-bearing note to Angelica Corp. on January 1, 2023, and received $52,000 cash. Sophia uses the effective interest method. (a) Using
Two independent situations follow.1. On January 1, 2023, 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
Bian Inc. financed the purchase of equipment costing $85,000 on January 1, 2023, using a note payable. The note requires Bian to make annual $23,971 payments of blended interest and principal on
Mustafa Limited began operations on January 2, 2022. Mustafa employs nine individuals who work eight-hour days and are paid hourly. Each employee earns 10 paid vacation days and 6 paid sick days
Diagnostics Corp. follows IFRS and sells its products in expensive, reusable containers that can be tracked. The customer is charged a deposit for each container that is delivered and receives a
ABC Airlines carried more than 11.9 million passengers to over 160 destinations in 17 countries in 2022. ABC is the descendant of several predecessor companies, including AB Air and BC Airlines. The
Smythe Corporation sells televisions at an average price of $850. The televisions come with a standard one-year warranty. Ignore any cost of goods sold. Smythe also offers each customer a separate
Brooks Inc. sells portable computer equipment with a two-year warranty contract that requires the corporation to replace defective parts and provide the necessary repair labour. During 2023, the
The following are selected 2023 transactions of Darby Corporation.Sept. 1 Purchased inventory from Orion Ltd. on account for $50,000. Darby uses a periodic inventory system.Oct. 1 Issued a $50,000,
Takemoto Inc. borrowed $60,000 on November 1, 2023, by signing a $61,350, three-month, zero-interest-bearing note(a) Using a financial calculator or Excel, calculate the effective interest charged on
You are a recent MBA graduate with a specialty in data analytics. This has led to an excellent new career, as it complements your undergraduate business degree and CPA designation. Your new position
The payroll of Sumerlus Corp. for September 2023 is as follows. Total payroll was $485,000. Pensionable (CPP) and insurable (EI) earnings were $365,000. Income taxes in the amount of $85,000 were
Shaddick Corp., a public company following IFRS, began its 2023 fiscal year with a debit balance of $11,250 in its Income Tax Receivable account. During the year, Shaddick made quarterly income tax
Upland Limited borrowed $40,000 on November 1, 2023, by signing a $40,000, three-month, 9% note. Prepare Upland’s November 1, 2023 entry; the December 31, 2023 annual adjusting entry; and the
To increase the sales of its Sugar Kids breakfast cereal, KW Foods Limited (KW) places one coupon in each cereal box. Five coupons are redeemable for a premium consisting of a child’s hand puppet.
Refer to the information for Upland Limited in BE13.4. Assume that Upland uses reversing entries. Prepare the 2024 journal entry(ies) for Upland.BE13.4Upland Limited borrowed $40,000 on November 1,
The Hwang Candy Corporation (HCC) offers a mini piggy bank as a premium for every five chocolate bar wrappers that customers send in along with $2.00. The chocolate bars are sold by HCC to
On December 31, 2023, Hornsby Corporation had $1.2 million of short-term debt in the form of notes payable due on February 2, 2024. On January 21, 2024, to ensure that it had sufficient funds to pay
On December 31, 2023, Zimmer Corporation has $7.9 million of short-term debt in the form of notes payable that are due in 2024 to Provincial Bank. On January 28, 2024, Zimmer enters into a
Goldwing Corporation offers enriched parental benefits to its staff. While the government provides compensation based on Employment Insurance legislation for a period of 12 months, Goldwing increases
Mullen Music Limited (MML) carries a wide variety of musical instruments, sound reproduction equipment, recorded music, and sheet music. MML uses two sales promotion techniques—warranties and
Refer to the information about Clausius Ltd. in BE13.11. Assume instead that the tax return indicated 2023 income tax of $10,200.(a) Prepare the adjusting year-end entry to recognize the 2023 income
On January 1, 2023, Schmitt Inc.’s general ledger had these liability accounts:In addition, Schmitt had a balance in HST Receivable of $4,260 at January 1, 2023. Schmitt uses a periodic inventory
Clausius Ltd. made four quarterly payments of $3,200 each to the Receiver General for Canada during 2023 as instalment payments on its estimated 2023 corporate tax liability. At year end,
Hamilton Airlines is faced with two situations that need to be resolved before the financial statements for the company’s year ended December 31, 2023, can be issued. 1. The airline is being
On May 1, 2023, 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
Selzer Equipment Limited sold 500 Rollomatics on account during 2023 for $6,000 each. Ignore any cost of goods sold. During 2023, Selzer spent $30,000 servicing the two-year warranties that are
At December 31, 2023, Parew Corporation has a long-term debt of $700,000 owing to its bank. The existing debt agreement imposes several covenants related to Parew’s liquidity and solvency. At
Dungannon Enterprises Ltd. sells a specialty part that is used in widescreen televisions and provides the ultimate in screen clarity. To promote sales of its product, Dungannon launched a program
At December 31, 2023, Burr Corporation owes $500,000 on a note payable due February 15, 2024. Assume that Burr follows IFRS and that the financial statements are completed and released on February
Cléroux Corporation sold 150 colour laser copiers in 2023 for $4,000 each, including a one-year warranty. Maintenance on each machine during the warranty period averages $300.Instructionsa. Prepare
At December 31, 2023, 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, 2023 adjusting entry.
Laurin Corporation offers parental benefits to its staff as a top-up to EI benefits so that employees end up receiving 100% of their salary for a maximum of 12 months of parental leave. Ruzbeh Awad,
To increase sales, Bélanger Inc., a public company following IFRS, implemented a customer loyalty program that rewards a customer with one loyalty point for every $10 of purchases on a select group
Primeau Inc. pays its officers bonuses based on income. For 2023, the bonuses total $350,000 and are paid on February 15, 2024. Prepare Primeau’s December 31, 2023 adjusting entry and the February
Novack Machinery Co. manufactures equipment to a very high standard of quality; however, it must still provide a warranty for each unit sold, and there are instances where the machines do require
Moleski Limited, a private company following ASPE, includes one coupon in each box of soap powder that it produces, and 10 coupons are redeemable for a premium (a kitchen utensil). In 2023, Moleski
Sport Pro Magazine sold 12,000 annual subscriptions on August 1, 2023, for $18 each. Prepare Sport Pro’s August 1, 2023 journal entry and the December 31, 2023 annual adjusting entry, assuming the
Situation 1: Marquart Stamp Corporation records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. The stamps can be collected and then redeemed
Kawani Corporation has been operating for several years. On December 31, 2023, it presented the following SFP.Cost of goods sold in 2023 was $420,000, operating expenses were $51,000, and net income
Refer to the information for Jupiter Corp. in BE13.25. (a) Prepare entries for the warranty that recognize the sale as a multiple deliverable with the warranty as a separate service that Jupiter
Henry Corporation sells home entertainment systems. The corporation also offers to sell its customers a two-year warranty contract as a separate service. During 2023, Henry sold 20,000 warranty
Islim Limited manufactures faux fur coats of all types and sizes that are sold to specialty stores throughout Canada. Sales to retailers provide for payment within 60 days of delivery, and the
Jupiter Corp. provides at no extra charge a two-year warranty with one of its products, which was first sold in 2023. In that year, Jupiter sold products for $2.5 million and spent $68,000 servicing
On July 10, 2023, Nguyen Ltd. sold $1.7 million worth of compressors to retailers on account. Nguyen had paid $960,000 for these compressors. Nguyen grants the right to return compressors that do not
Wynn Corp. offers a set of building blocks to customers who send in three codes from Wynn cereal, along with $1. Wynn purchased 100,000 building block sets in 2023 for $2.50 each, and paid for them
St. Thomas Auto Repairs is preparing the financial statements for the year ended November 30, 2023. As the accountant, you are looking over the information regarding short-term liabilities, and
Four independent situations follow.Situation 1: During 2023, Sugarpost Inc. became involved in a tax dispute with the Canada Revenue Agency. Sugarpost’s tax lawyers have told management that
Yuen Corporation shows the following financial position and results for the three years ended December 31, 2023, 2024, and 2025 (in thousands):(a) For each year, calculate the current ratio and quick
You work for a major airline company in Canada, MarwanJet. You started a new position as a business analyst in the Loyalty AirPlan Miles department during the COVID-19 pandemic. The program has a
You work as a senior analyst for the HR department of Dajani Agriculture Inc. The company offers its employees entitlement to vacation days above the legal requirement. These vacation days, if
Consider each scenario below, and classify each type of lease from the perspective of the lessor:Case A On 15 March 20X5, Edaby Inc. (Lessor) enters into an arrangement with Telemin (Lessee) to
Hruska Corp. provides post-employment benefits to its retirees for dental and supplementary health care. The following information relates to these benefits:Required:1. Compute the benefit obligation
Tony Ling is an analyst working to support the loans department at Tuned Bank. He is currently recasting his clients? financial statements so that they reflect income tax expense on a taxes payable
Camani Corp. (CC) is involved in the production, distribution, and marketing of consumer products that encompass a broad range of items, from hair care products, to cosmetics and perfume, to vitamins
Bryant Co.?s statement of financial position (condensed and unclassified) for two years is shown below:Required:1. Prepare a comparative SFP in good form, including vertical percentage analysis.
Refer to the data in TR19-2 and solutions to TR19-3 to TR19-5.Data From TR19-2The following data are to be used for TR19-2 to TR19-6. Good day Ltd., a public company, has a defined benefit pension
Buslines Inc.?s income statement (condensed) for two years is shown below:Required:1. Prepare vertical percentage analysis of the income statement. Round to the nearest percent. Comment on any
At the end of 20X6, the records of Security Systems Corp. showed the following:Required:Compute basic EPS. Show computations. Bonds payable, 9%, nonconvertible Preferred shares: Class A, no-par,
You are evaluating two public companies in the forest industry. Both companies follow IFRS and are integrated companies that own or lease timber properties (biological assets), harvest trees, and
Financial Metrics Ltd. provides life insurance and dental coverage to retirees. The yield rate on long-term debt is 5%. The following information relates to these benefits:Required:1. Compute the
Refer to the information provided in TR22-1 along with the selected additional information below.Data From TR22-1Riyers Inc. has the following selected information for its years ended June
The SFP for Bold Chocolates Ltd. is as follows:Required:1. Prepare a comparative vertical percentage analysis. Round to the nearest percent.2. Prepare a horizontal percentage analysis of the
Riyers Inc. has the following selected information for its years ended June 30:Required:Calculate the gross profit margin and operating margin for each of the three years. Comment on the trend. What
Jaytag Ltd. (JL) is a public company listed on the TSX. Additional information on selected transactions/ events is provided below:1. At the beginning of 20X4, EC purchased some equipment for
Contract A:This contract is a lease. CTC has an identified the asset in a specific location of the mall. During the duration of the 2-year contract, CTC has a right to use the kiosk and
Winter Fun Incorporated (WFI) has been operating since the 1990s. It owns and operates over 25 ski clubs across Canada. WFI also owns and operates ski shops where customers can rent or buy ski
Ng Holdings Ltd. had its first audit in 20X4. Its preliminary income figure, before tax, was $786,000. The following items were discovered:a. Ng issued a bond payable at the beginning of 20X1 and
Refer to the information in A22-15; Zandi?s financial statements contain the following note disclosure:Commitments:The company has commitments for operating lease payments for the next five years as
PWX Inc. has the following information for its years ended June 30:Required:Calculate the accounts receivable turnover and average collection period for 20X3 and 20X2. Comment on the trend. What
Farmhill Ltd. had 1,400,300 common shares outstanding on 1 January 20X6, the beginning of its 20X6 fiscal year. During the year, on 1 May, the company issued 520,000 preferred shares convertible into
Wilcox Ltd. has total assets of $35,000,000, and manufactures fine hand tools. Selected financial ratios for Wilcox and industry averages are as follows:Required:Referring to the information
The following situations all involve a change in accounting. Assume the company is public unless specified otherwise.a. A private company adopted percentage-of-completion for a long-term construction
You have recently been hired as an internal analyst at Hone Inc., reporting directly to the owner. The owner has requested you compare the operations and financial position of Hone Inc. with Poot
Arctic Charm Corp. is a privately owned Canadian company. The company experienced poor operating results in the years 20X0 to 20X3, and, in 20X3, it reorganized and refinanced its operations.
It is 5 December 20X0 and you work in the accounting department for JBC Manufacturing. You have been asked to prepare an analysis on the estimated useful life of the manufacturing equipment.

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