Questions and Answers of Intermediate Accounting Volume 2

Guetza has a defined benefit pension plan. At the end of the year 20X0, plan assets are $3,450,000, and the defined benefit obligation is $3,120,000. There is an asset ceiling that caps the net
Computer Imaging Ltd. (CIL) established a formal pension plan 10 years ago to provide retirement benefits for all employees. The plan is noncontributory and is funded through a trustee that invests
Ivan Resources Corp. sponsors a defined benefit pension plan for its unionized labour force. The company disclosed the following in its annual financial statements:The company is considering the
Faste Ltd. has a defined benefit pension plan. The following information relates to this plan:Required:1. Compute the defined benefit obligation at 31 December 20X1 and the fair value of plan assets
Gurung Co. has a noncontributory, defined benefit pension plan adopted on 1 January 20X5. On 31 December 20X5, the following information is available:For accounting purposes:• Interest rate used
Maple Construction Corp. has a defined benefit pension plan. Information concerning the 20X7 and 20X8 fiscal years is presented below:From the plan actuary:• Current service cost in 20X7 is
Micro Computers Inc. sponsors a defined benefit pension plan for its employees. It is now the 20X2 fiscal year. Long-term corporate borrowing rates for companies with this risk profile are 5%.
In late 20X0, Security Services Ltd. established a defined benefit pension plan for its employees. At the inception of the plan, the actuary determined the present value of the defined benefit
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
TCGY Ltd. reports the following data for 20X8:The company has a contributory defined benefit pension plan covering all employees over the age of 30.Required:1. How much did the pension plan assets
Refer to the data in TR19-9 and related solution for the opening balances. For 20X5, the following information is provided. The market yield rate for high-quality corporate bonds of similar term and
USLM Inc. has a defined benefit pension plan. At the end of the year 20X4, the pension fund assets were $7,670,000 and the defined benefit obligation was $7,250,000. Invoking the asset ceiling caps
Refer to the data in TR19-2 and your response to TR19-4.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 plan and
Gazra Inc. established a defined contribution pension plan at the beginning of 20X5. The company will contribute a specified percentage of each employee’s annual salary. These payments vest
There are three major approaches to measure and allocate pension amounts to given fiscal years. These approaches are used by actuaries to determine funding amounts and by accountants to determine
Refer to the data in TR19-2.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 plan and a 31 December year-end. The
Geneve Ltd. (GL) is a manufacturer of personal and commercial transportation solutions, including train engines and train cars. The company is one of the largest private companies in Canada and
Refer to the data in TR19-2.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 plan and a 31 December year-end. The
A company has a contributory defined benefit pension plan covering all employees over the age of 30. An analyst was quoted as saying:Required:1. What factors associated with defined benefit plans
Consider the following independent scenarios:Scenario A Wertz Ltd. has a pension plan for its employees. The plan requires that Wertz contribute 4% of employee salaries to a pension fund,
Candida Ltd. is a Canadian public company in the business of exploration, production, and marketing of natural gas. It also has power generation operations. Earnings in 20X5 were $2.4 billion, and
Zio Ltd. established a defined contribution pension plan at the beginning of 20X9. The company will contribute 3% of each employee’s salary annually. Total salaries in 20X9 were expected to be $7.3
Solace Ltd. (SL) is a grocery food distributor operating nationally throughout Canada. The CFO for the company died suddenly during the year and the payroll accountant was put in charge of recording
Toko Inc. is a real estate investor. The company purchases commercial properties and then resells them once the property has grown in value. This is normally done by renewing leases at higher rates
Argyle Ltd. signed a 24-month lease to rent a new computer for $170 per month. The fair value of the computer is $3,600. The lease will commence on 1 November 20X1 with payments beginning
Sotherlin Inc. has a defined contribution plan. It has agreed to pay $275,000 now at the end of 20X4 and another payment of $200,000 at the end of 20X6 for employees’ services for 20X4. The current
Complete the sentences below:1. The actuarial cost method that must be used to determine current service cost is the ____________________.2. A pension plan where the risk of the level of eventual
Brookdom Properties is a real estate developer and property manager. The company owns and operates a portfolio of retail, office, and hotel properties throughout Canada. Their mandate is to purchase
Jordin is an equipment dealer that occasionally uses leasing as a means of selling its products. On 1 January 20X1, Jordin leased equipment to Easten Corp. The lease term was four years with annual
Refer to the information in A18-9. Jeffrey Leasing Inc. is a public company. Jeffrey’s implicit interest rate in the Yvan lease is 6%.Data From A18-9On 2 January 20X4, Yvan Ltd., a public company,
Keener Construction Ltd. leased equipment for five years from Dominion Leasing Inc. for use in a building project. At the end of the five-year term, Keener returns the asset to Dominion Leasing Inc.
Refer to the information in A18-8.Data From A18-8On 31 December 20X0, Columbia Inc. entered into an agreement with Scotia Ltd. to lease equipment with a useful life of 6 years. Columbia Inc. will
Matteo Laboratories Ltd. (MLL) leased lab equipment from LabEquip Corp (LEC). The lease term is three years with an annual rent of $40,000, due at the beginning of the year. Initial costs for
On 10 December 20X0, Noel Inc. entered into a six-year equipment lease with Williams Ltd. The terms of the lease are as follows:• The lease term will begin on 1 January 20X1.• The fair value of
On 2 January 20X5, Jayden Inc (lessee) entered into an agreement with Holstead Inc (lessor) to lease some equipment for five years. The terms of the agreement are as follows:• The fair value of the
On 24 February 20X1, Ready Distributing Ltd., a private company, signed a lease for conveyor equipment. This is specialized equipment that can be used only in Ready’s manufacturing plant. The fair
Pierce Inc. owns a building in downtown Halifax. Pierce enters into an agreement with Mattenay Corporation whereby Mattenay sells the building—but not the land on which it sits—to Mattenay and
JMK owns a distribution factory that it uses to store its inventory. On 1 January 20X7, the factory was sold to a large REIT for $8,700,000. The factory had an original cost of $16,000,000 and
On 1 January 20X2, Supergrocery Inc. sold its major distribution facility, with a 22-year remaining life, to a real estate investment trust (REIT) for $9,000,000 cash, its estimated fair value. The
In May 20X0, LFT entered into the following arrangement to lease some manufacturing equipment starting on 1 June 20X0. Additional details are as follows:• The lease term commences on 1 June and is
Lessee Ltd. agreed to a noncancellable lease for which the following information is available:a. The asset is new at the inception of the lease term and is worth $160,000.b. Lease term is four years,
Bombay Ltd. is expanding and needs more manufacturing equipment. The company has been offered a lease contract for equipment with a fair value of $260,000. The lease has a five-year term, with
Griffiths Ltd. has a five-year lease, and the following lease liability amortization table was prepared when the lease was originally signed, using an 8% interest rate. Griffiths expects to pay
Jain Corp. has negotiated a lease for new machinery. Jain Corp. is excited about the new products it will be able to produce with this machinery at gross margins much higher than historical levels.
Watson Co. entered into a lease arrangement for a truck on 1 April 20X2 that had the following terms:• The lease payments are $12,500 per year, payable each 1 April for four years. The lease may be
On 1 January 20X1, Canada Leasing Inc. acquired an asset on behalf of Magnum Ltd. for $100,000. Canada Leasing and Magnum enter into a six-year lease for the asset, effective 1 January 20X1, with
On 2 January 20X4, Yvan Ltd., a public company, entered into a five-year equipment lease with Jeffery Leasing Inc. The lease calls for annual lease payments of $150,000, payable at the beginning of
On 31 December 20X0, Columbia Inc. entered into an agreement with Scotia Ltd. to lease equipment with a useful life of 6 years. Columbia Inc. will make four equal payments of $100,000 at the
Tartufo Corp. entered into a 5-year lease agreement with Gelato Inc. to lease equipment beginning on January 1, 20X5. The IBR is 9% while the rate implicit in the lease is 8%. Tartufo Corp. is aware
Niko Ltd. signed a lease for a five-year term that requires yearly, beginning-of-year payments of $104,000 including maintenance.Based on allocating the lease payment on relative stand-alone prices,
On 1 January 20X2 Grocers R Us entered into a lease to rent a mid-sized tractor trailer from TT Inc. with the following terms:• The company will rent a tractor-trailer beginning 1 April 20X2 for a
On 31 December 20X6 Joseph’s Renovations Ltd. (JRL) entered into a lease to rent construction equipment that had the following terms:• JRL’s incremental borrowing rate is 8%; prime rate is 6%;
The following lease liability amortization table was developed for Smith Company and Lease 34T:Required:1. Provide an independent proof of the $18,540 liability balance after the second payment.2.
On 1 January 20X6 Canadian Leasing Inc. leased a piece of machinery to Ornamental Concrete Ltd., with the following terms:• The lease is for five years; Ornamental cannot cancel the lease during
“Amelia, I need you to put your other projects on hold and do a little work on these financials for me.”You follow Jeng Wong, your boss and special projects manager for Holdings Ltd., into his
Peridis Inc. has entered into a contract with an asset-based finance company to lease some equipment commencing January 1, 20X1. The lease payments are $20,000 per year for 8 years, with payments
On 18 December 20X1, Kushner Construction Ltd. leased a crane from Schultz Equipment Inc. for use in a building project. The lease is for three years. The lease commences on 1 January 20X2.Annual
Information has been gathered for two leases:Lease A • The fair value of the equipment is $800,000 at the inception of the lease.• The lease term is 5 years, and there is a 3-year renewal
A large, public telecommunications company has the following leases: Lease A Lease of office space for 5 years, with a 5-year renewal period. Rental payments are $5,000/month, due at the
Argyle Ltd. signed a 24-month lease to rent a new computer for $170 per month. The fair value of the computer is $3,600. The lease will commence on 1 November 20X1 with payments beginning
Pacific Trading Co. has a SARs program for managers. These individuals receive a cash payment after three years of service, calculated as the excess of share price over $10. In early 20X3, the 30
On 1 June 20X6 Marino Developments Inc. entered into a 12-month contract to lease a backhoe from Constructors Ltd. for $3,700 monthly with payments made at the beginning of each month. Marino’s
The following data relates to Ottawa Ltd.:Transactions during the year:1. Preferred shares were issued for $100,000 during the year. Share issue costs of $2,000 were charged directly to retained
Scenario A Crayoli Inc. is a publicly traded company. During the year, one of the bigger investors contributed land that was purchased by the investor for $800,000 in exchange for 40,000 common
Refer to the facts of A14-28.Data From Assignment14-28Clean Energy Ltd. began 20X2 with shareholders’ equity as follows:The company’s tax rate is 40%. In 20X2, the company reported transactions
Boxwood Corp. had the following transactions for the year ended March 20X6:1. A cash dividend of $217,000 was declared and paid.2. 70,000 additional common shares were issued in exchange for a
Zu Corp. has the following items in shareholders’ equity at 31 December 20X8:The following transactions and events happened in 20X9, in chronological order:a. A cash dividend of $38,000 was
The following transactions may change an account in shareholders’ equity in some way:a. Declare and issue a 2-for-1 stock split.b. Record donated building.c. Acquire treasury shares.d. Record a
Howard Corp. is a publicly owned company whose shares are traded on the TSX. At 31 December 20X4, Howard had unlimited shares of no-par-value common shares authorized, of which 15,000,000 shares were
Robinson Industries reported the following statement of shareholders’ equity for the year ended 31 December 20X7:Required:1. What is the nature of AOCI? Where does it appear in the financial
Below is a partially completed statement of changes in equity for Torino Capital Ltd. (in thousands of dollars).Required:Complete the statement of changes in equity to reflect the transactions and
The following statement of changes in shareholders’ equity summarizes various equity transactions that occurred during 20X2:Required:Journalize the transactions in the statement of shareholders’
On 1 January 20X0, Reez reported the following in shareholders’ equity:The following transactions occurred during the year and have not yet been accounted for (in the order presented):1. Recorded
During 20X7, Greens Ltd. reported the following:a. FVOCI investments with a recorded fair value of $455,000 were sold for $500,500. The original cost of these investments had been $200,000 in 20X5.
Tunito Corp., a public corporation, purchased equipment on 1 March and on the same day arranged for the supplier to begin customizing the equipment to meet Tunito Corp.’s specific needs. A payment
Jerrow Corp. has recorded $520,000 of total interest expense from $9,500,000 of general borrowing, which consists of short-term bank debt of $1,500,000 and an $8,000,000 bond payable. Other financing
Use the facts from TR13-5.Data From TR13-5Cumming Corp. issues a $6,000,000, 5% bond on 1 April 20X3. At this time, market interest rates are in the range of 6%. The bond had a 10-year life from 1
Refer again to the data in A17-6.Data From A17-6Tyler Toys Ltd. reported the following:Required:1. Provide the journal entry to record the benefit of the tax loss in 20X5, assuming that the tax loss
Moon Ltd. reported the following:Required:1. What is the amount of the taxable income or loss in each year?2. How much is the tax refund to be claimed in 20X8?3. What is the amount of the loss
Jupiter Ltd. reported the following:Required:1. What is the amount of the taxable income or loss in each year? What is the amount of the loss carryforward at the end of 20X8?2. Prepare a journal
Saturn Ltd. began operations in 20X3. For the first six years of operations, the company had the following pre-tax net earnings (loss):There have been no temporary differences between pre-tax
Remnant Inc. is a public company that reports under IFRS and has a 31 December year-end. Over the past three years the company has reported taxable income and paid taxes as follows:At the end of
Senior Home Living (SHL) is a Canadian-based corporation located in British Columbia. SHL provides senior living residences across Canada. The company was incorporated in 1975, and has been
Melinda Ltd. had a gross $100,000 loss carryforward at the end of 20X6. This gross loss carryforward increased to $140,000 at the end of 20X7. In 20X8, $50,000 of the LCF was used. The enacted tax
Mercury Ltd. reported earnings of $75,000 in 20X9. The company has $55,000 of depreciation expense this year, and claimed CCA of $90,000. The tax rate was 25%. At the end of 20X8, there was a $10,000
Sol Ltd. reported earnings of $400,000 in 20X8. The company has $80,000 of depreciation expense this year, and claimed CCA of $120,000. The tax rate was 28%. At the end of 20X7, there was a $100,000
Premium Blinds Ltd. specializes in the manufacture of custom and pre-finished blinds and drapes for windows and doors. The firm was founded by Bill Khadim, who retired 10 years ago and now lives in
The following data is related to Cold Brook Resources Ltd.:During the year, the following transactions took place:a. Earnings were $2,600,000.b. Cash dividends were paid.c. The common share
Signs and Designs Inc. (SDI) is a company operating in the advertising industry. SDL provides companies with designs for new signage and company logos. The company has a profit-sharing plan whereby
Information has been gathered for two contracts:Contract A Cell Talk Corp (CTC) recently entered into a two-year contract with a local shopping mall to set up a cell phone kiosk. For the
Softle Corporation is a privately owned corporation that sells exercise equipment. During the year, the company entered into a strategic partnership with an entrepreneur looking to work with a bigger
Abolique has recently gone through the process of issuing common shares. The following costs were incurred during the year:• Underwriting fees: $15,000• Professional fees (accounting and legal):
Globile Corporate is a public corporation listed on the Toronto Stock Exchange. The company has three classes of shares, as follows:• Common shares (no par-value, unlimited authorized)• Series A
Jenga Services Ltd. is a Canadian public company that owns a variety of online media platforms.While each platform varies, the mission of Jenga is to publish relevant news content that addresses
Value Production Corp. currently has a debt to equity ratio of 3.2-to-1, based on $16 million of debt and $5 million of equity. The company is looking to raise $2 million in new financing for an
Canada Resources Ltd. issued a 14-year, $15,000,000 debenture with an interest rate of 5%; cash interest is paid semi-annually. The market rate of interest for debt of similar size, risk, and term is
Twixt Corp. issued $5,000,000 of convertible bonds on 1 January for $4,790,000 cash. The bond had the following terms:• Bonds mature in five years’ time.• Annual interest, 5%, is paid each 31
Rebelcork Minerals is a publicly traded company listed on the Toronto Stock Exchange. On 1 January 20X4, the company granted 40,000 stock options to 50 of its employees. Relevant information about
Listed below are six independent sources of deferred income tax. For each item, indicate whether the deferred income tax account from this source alone would be a debit or a credit. Item a.
Renat Mehali is a junior accountant, working in the same group as you at your public accounting firm, P&A Partners. Renat looks up to you and often turns to you for guidance and mentorship. Renat

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