Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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*37. Briefly describe the presentation and disclosure requirements for first-time adoption of IFRS.
*36. If a company elects the deemed cost exemption, must it continue to use revaluation accounting subsequent to first-time adoption? Explain.
*35. Briefly describe the deemed cost exemption to retrospective application at first-time adoption of IFRS.
*34. What are elective exemptions to retrospective application at firsttime adoption of IFRS?
*33. Briefly describe the required exemptions to retrospective application at first-time adoption of IFRS.
*32. What is the rationale for exemptions to retrospective application at first-time adoption of IFRS?
*31. What are the steps to be completed in preparing the opening IFRS statement of financial position?
*30. What are the characteristics of high-quality information in a company’s first IFRS financial statements?
*29. How are the date of transition and the date of reporting determined in first-time adoption of IFRS?
*28. Briefly explain the need for a standard on first-time adoption of IFRS.
*27. Explain the meaning of the following terms: (a) common-size analysis, (b) vertical analysis, (c) horizontal analysis, and (d) percentage analysis.
*26. What is the relationship of the asset turnover to the return on assets?
*25. In calculating inventory turnover, why is cost of goods sold used as the numerator? As the inventory turnover increases, what increasing risk does the business assume?
*24. Distinguish between ratio analysis and percentage analysis relative to the interpretation of financial statements. What is the value of these two types of analyses?
*23. A close friend of yours, who is a history major and who has not had any college courses or experience in business, is receiving the financial statements from companies in which he has minor investments(acquired for him by his now-deceased father). He asks you what he needs to know to interpret
*22. “The significance of financial statement data is not in the amount alone.” Discuss the meaning of this statement.
21. Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing plc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an
20. What is the difference between an auditor’s unmodified opinion, or “clean” opinion, and a modified one?
19. The following comment appeared in the financial press: “Inadequate financial disclosure, particularly with respect to how management views the future and its role in the marketplace, has always been a stone in the shoe. After all, if you don’t know how a company views the future, how can
18. Olga Conrad, a financial writer, noted recently, “There are substantial arguments for including earnings projections in annual reports and the like. The most compelling is that it would give anyone interested something now available to only a relatively select few—like large shareholders,
17. “The financial statements of a company are management’s, not the accountant’s.” Discuss the implications of this statement.
16. An article in the financial press entitled “Important Information in Annual Reports This Year” noted that annual reports include a management commentary section. What would this section contain?
15. What approaches have been suggested to overcome the seasonality problem related to interim reporting?
14. Dierdorf SE, a closely held company, has decided to go public. The controller, Ed Floyd, is concerned with presenting interim data when an inventory write-down is recorded. What problems are encountered with inventories when quarterly data are presented?
13. What are the accounting problems related to the presentation of interim data?
12. What are interim reports? Why is a complete set of financial statements often not provided with interim data?
11. The controller for Lafayette AG recently commented, “If I have to disclose our segments individually, the only people who will gain are our competitors and the only people that will lose are our present shareholders.” Evaluate this comment.
10. What is an operating segment, and when can information about two operating segments be aggregated?
9. Identify the segment information that is required to be disclosed by IFRS.
8. What quantitative materiality test is applied to determine whether a segment is significant enough to warrant separate disclosure?
7. What are diversified companies? What accounting problems are related to diversified companies?
6. What are the major types of subsequent events? Indicate how each of the following “subsequent events” would be reported.a. Collection of a note written off in a prior period.b. Issuance of a large preference share offering.c. Acquisition of a company in a different industry.d. Destruction of
5. The following information was described in a note of Canon Packing.“During August, Holland Products AG purchased 311,003 ordinary shares of the Company, which constitutes approximately 35% of the shares outstanding. Holland has since obtained representation on the Board of Directors.”“An
4. What type of disclosure or accounting do you believe is necessary for the following items?a. Because of a general increase in the number of labor disputes and strikes, both within and outside the industry, there is an increased likelihood that a company will suffer a costly strike in the near
3. The IASB requires a reconciliation between the effective tax rate and the government’s statutory rate. Of what benefit is such a disclosure requirement?
2. What is the full disclosure principle in accounting? Why has disclosure increased substantially in the last 10 years?
1. What are the major advantages of notes to the financial statements?What types of items are usually reported in notes?
21. Why is it desirable to use a worksheet when preparing a statement of cash flows? Is a worksheet required to prepare a statement of cash flows?
20. What are some of the arguments in favor of using the indirect(reconciliation) method as opposed to the direct method for reporting a statement of cash flows?
19. During 2025, Simms Group redeemed ¥2,000,000 of bonds payable for ¥1,880,000 cash. Indicate how this transaction would be reported on a statement of cash flows, if at all.
18. Silva Rojas and Hans Jensen were discussing the statement of cash flows of Liu Ltd. In the notes to the statement of cash flows was a schedule entitled “Non-cash investing and financing activities.”Give three examples of significant non-cash transactions that would be reported in this
17. Classify the following items as (1) operating, (2) investing,(3) financing, or (4) significant non-cash investing and financing activities, using the direct method.a. Cash payments to employees.b. Redemption of bonds payable.c. Sale of building at book value.d. Cash payments to suppliers.e.
16. Each of the following items must be considered in preparing a statement of cash flows for Blackwell Inc. for the year ended December 31, 2025. Indicate how each item is to be shown in the statement, if at all.a. Plant assets that had cost $18,000 6½ years before and were being depreciated on a
15. The net income for Letterman AG for 2025 was €320,000. During 2025, depreciation on plant assets was €124,000, amortization of patent was €40,000, and the company incurred a loss on sale of plant assets of €21,000. Compute net cash flow from operating activities.
14. Explain how the amount of cash payments to suppliers is computed under the direct method.
13. The board of directors of Gifford plc declared cash dividends of£260,000 during the current year. If dividends payable was £85,000 at the beginning of the year and £90,000 at the end of the year, how much cash was paid in dividends during the year?
12. Your roommate is puzzled. During the last year, the company in which she is a shareholder reported a net loss of $675,000, yet its cash increased $321,000 during the same period of time. Explain to your roommate how this situation could occur.
11. Collinsworth plc reported sales on an accrual basis of £100,000. If accounts receivable increased £30,000 and the allowance for doubtful accounts increased £9,000 after a write-off of £2,000, compute cash sales.
10. Broussard Company reported net income of $3.5 million in 2025.Depreciation for the year was $520,000, accounts receivable increased$500,000, and accounts payable increased $300,000. Compute net cash flow from operating activities using the indirect method.
9. Differentiate between the direct method and the indirect method by discussing each method.
8. Why is it necessary to convert accrual-based net income to a cash basis when preparing a statement of cash flows?
7. Unlike the other major financial statements, the statement of cash flows is not prepared from the adjusted trial balance. From what sources does the information to prepare this statement come, and what information does each source provide?
6. Identify the following items as (1) operating, (2) investing, or(3) financing activities: purchase of land, payment of dividends, cash sales, and purchase of treasury shares.
5. Identify and explain the major steps involved in preparing the statement of cash flows.
4. What are the major sources of cash (inflows) in a statement of cash flows? What are the major uses (outflows) of cash?
3. Differentiate between investing activities, financing activities, and operating activities.
2. Of what use is the statement of cash flows?
1. What is the purpose of the statement of cash flows? What information does it provide?
CA21.6 (LO 2) Ethics (Change in Estimate, Ethics) Mike Crane, audit senior of a large public accounting firm, has just been assigned to the Frost Corporation’s annual audit engagement. Frost has been a client of Crane’s firm for many years. Frost is a fast-growing business in the commercial
CA21.5 (LO 2) Writing (Changes in Estimate) As a public accountant, you have been contacted by Joe Davison, CEO of Sports-Pro Athletics, a manufacturer of a variety of athletic equipment. He has asked you how to account for the following changes.1. Sports-Pro appropriately changed its depreciation
CA21.4 (LO 1, 2, 3, 4) Writing (Analysis of Various Accounting Changes and Errors)Katherine Irving, controller of Lotan Corp., is aware that IFRS has issued a pronouncement on accounting changes. After reading the pronouncement, she is confused about what action should be taken on the following
CA21.3 (LO 1, 2, 3) (Analysis of Three Accounting Changes and Errors) The following are three independent, unrelated sets of facts relating to accounting changes.Situation 1: Sanford Company is in the process of having its first audit. The company has used the cash basis of accounting for revenue
CA21.2 (LO 1, 2, 3, 4) (Analysis of Various Accounting Changes and Errors) Various types of accounting changes can affect the financial statements of a business differently. Assume that the following list describes changes that have a material effect on the financial statements for the current year
CA21.1 (LO 1, 2, 3, 4) Groupwork (Analysis of Various Accounting Changes and Errors)Joblonsky Jewelry has recently hired a new independent auditor, Karen Ogleby, who says she wants “to get everything straightened out.” Consequently, she has proposed the following accounting changes in
P21.10 (LO 3, 4) (Error Analysis and Correcting Entries) You have been asked by a client to review the records of Roberts Company, a small manufacturer of precision tools and machines. Your client is interested in buying the business, and arrangements have been made for you to review the accounting
P21.9 (LO 3, 4) (Error Analysis) Lowell AG has 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 cash basis because of errors made by an inexperienced bookkeeper. Income statements prepared by
P21.8 (LO 3, 4) Groupwork (Comprehensive Error Analysis) On March 5, 2026, you were hired by Hemingway plc, a closely held company, as a staff member of its newly created internal auditing department. While reviewing the company’s records for 2024 and 2025, you discover that no adjustments have
P21.7 (LO 3, 4) Groupwork (Error Corrections) You have been assigned to examine the financial statements of Zarle Company for the year ended December 31, 2025. You discover the following situations.1. Depreciation of $3,200 for 2025 on delivery vehicles was not recorded.2. The physical inventory
P21.6 (LO 2, 3, 4) (Accounting Changes and Error Analysis) On December 31, 2025, before the books were closed, the management and accountants of Madrasa SA made the following determinations about three depreciable assets.1. Depreciable asset A was purchased January 2, 2022. It originally cost
P21.4 (LO 2) Groupwork Ethics (Accounting Changes) Aston plc performs year-end planning in November of each year before its calendar year ends in December. The preliminary estimated net income is £3 million. The CFO, Rita Warren, meets with the company president, J. B. Aston, to review the
P21.3 (LO 1, 2, 3, 4) (Error Corrections and Accounting Changes) Chen Group is in the process of adjusting and correcting its books at the end of 2025. In reviewing its records, the following information is compiled.1. Chen has failed to accrue sales commissions payable at the end of each of the
P21.2 (LO 1, 2, 3, 4) (Comprehensive Accounting Changes and Error Analysis Problem)Botticelli SpA was organized in late 2022 to manufacture and sell hosiery. At the end of its 4th year of operation, the company has been fairly successful, as indicated by the following reported net incomes.2022
P21.1 (LO 2, 3) Groupwork (Change in Estimate and Error Correction) Holtzman Company is in the process of preparing its financial statements for 2025. Assume that no entries for depreciation have been recorded in 2025. The following information related to depreciation of fixed assets is provided to
E21.21 (LO 3, 4) (Error Analysis) When the records of Aoki Ltd. were reviewed at the close of 2025, the errors listed as follows were discovered. For each item, indicate by a checkmark in the appropriate column whether the error resulted in an overstatement, an understatement, or had no effect on
E21.20 (LO 3, 4) (Error Analysis) The before-tax income for Fitzgerald Co. for 2024 was $101,000, and for 2025 was $77,400. However, the accountant noted that the following errors had been made.1. Sales and revenue for 2024 included $38,200 which had been received in cash during 2024, but for which
E21.15 (LO 3, 4) (Error Correction Entries) The first audit of the books of Fenimore Company was conducted for the year ended December 31, 2025. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items were:1. At the
E21.14 (LO 1) (Various Changes in Policy—Inventory Methods) Following is the net income of Benchley Instrument AG, a private company, computed under the two inventory methods using a periodic system.FIFO Average-Cost 2022 €26,000 €23,000 2023 30,000 25,000 2024 29,000 27,000 2025 34,000
E21.13 (LO 1) (Change in Policy—Long-Term Contracts) Bryant Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2025. For tax purposes, the company employs the cost-recovery method and will continue
E21.12 (LO 2) (Change in Estimate—Depreciation) Frederick Industries changed from the double-declining-balance to the straight-line method in 2025 on all its plant assets. There was no change in the assets’ residual values or useful lives. Plant assets acquired on January 2, 2022 had an
E21.15 (LO 3, 4) (Error Correction Entries) The first audit of the books of Fenimore Company was conducted for the year ended December 31, 2025. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items were:1. At the
E21.14 (LO 1) (Various Changes in Policy—Inventory Methods) Following is the net income of Benchley Instrument AG, a private company, computed under the two inventory methods using a periodic system.FIFO Average-Cost 2022 €26,000 €23,000 2023 30,000 25,000 2024 29,000 27,000 2025 34,000
E21.13 (LO 1) (Change in Policy—Long-Term Contracts) Bryant Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2025. For tax purposes, the company employs the cost-recovery method and will continue
E21.12 (LO 2) (Change in Estimate—Depreciation) Frederick Industries changed from the double-declining-balance to the straight-line method in 2025 on all its plant assets. There was no change in the assets’ residual values or useful lives. Plant assets acquired on January 2, 2022 had an
E21.11 (LO 2) (Change in Estimate—Depreciation) Thurber Co. purchased for $710,000 equipment which 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 7 years on a straight-line basis. In 2025, it is
E21.10 (LO 2) (Depreciation Changes) On January 1, 2021, McElroy plc purchased a building and equipment that have the following useful lives, residual values, and costs.Building, 40-year estimated useful life, £50,000 residual value, £1,200,000 cost Equipment, 12-year estimated useful life,
E21.9 (LO 2, 3) (Error and Change in Estimate—Depreciation) Yoon Ltd. purchased a machine on January 1, 2022, for W44,000,000. At that time, it was estimated that the machine would have a 10-year life and no residual value. On December 31, 2025, the firm’s accountant found that the entry for
E21.8 (LO 1, 2, 3) (Accounting for Accounting Changes and Errors) Listed below are various types of accounting changes and errors.1. Change from FIFO to average-cost inventory method.2. Change due to overstatement of inventory.3. Change from an accelerated to straight-line method of depreciation.4.
E21.7 (LO 2, 3) (Change in Estimate and Error; Financial Statements) The following are the comparative income statements for Pannebecker Inc. for the years 2024 and 2025.2025 2024 Sales $340,000 $270,000 Cost of sales 200,000 142,000 Gross profit 140,000 128,000 Expenses 88,000 50,000 Net income $
E21.6 (LO 2) (Accounting Changes—Depreciation) Robillard SA acquired the following assets in January 2022.Equipment, estimated service life, 5 years; residual value, €15,000 €465,000 Building, estimated service life, 30 years; no residual value €780,000 The equipment has been depreciated
E21.5 (LO 1) (Accounting Change) Presented below are income statements prepared on an average cost and FIFO basis for Carlton SA, which started operations on January 1, 2024. The company presently uses the average-cost method of pricing its inventory and has decided to switch to the FIFO method in
E21.4 (LO 1) (Accounting Policy Change) Linden plc started operations on January 1, 2020, and has used the FIFO method of inventory valuation since its inception. In 2025, it decides to switch to the average cost method. You are provided with the following information.Net Income Retained Earnings
E21.3 (LO 1) (Accounting Policy Change) Ramirez Co. decides at the beginning of 2025 to adopt the FIFO method of inventory valuation. Ramirez has used the average-cost method for financial reporting since its inception on January 1, 2023, and has maintained records adequate to apply the FIFO method
E21.2 (LO 1) (Change in Policy—Inventory Methods) Whitman SA began operations on January 1, 2022, and uses the average-cost method of pricing inventory. Management is contemplating a change in inventory methods for 2025. The following information is available for the years 2022–2024.Net Income
E21.1 (LO 1) (Change in Policy—Long-Term Contracts) Cherokee Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2025. For tax purposes, the company employs the cost-recovery method and will continue
BE21.9 (LO 1, 2) Roundtree Manufacturing is preparing its year-end financial statements and is considering the accounting for the following items.1. The vice president of sales has indicated that one product line has lost its customer appeal and will be phased out over the next 3 years. Therefore,
BE21.8 (LO 3, 4) Indicate the effect—Understate, Overstate, No Effect—that each of the following errors has on 2024 net income and 2025 net income.2024 2025a. Equipment purchased in 2023 was expensed.b. Wages payable were not recorded at 12/31/24.c. Equipment purchased in 2024 was expensed.d.
BE21.7 (LO 3) At January 1, 2025, Cheng Ltd. reported retained earnings of ¥20,000,000. In 2025, Cheng discovered that 2024 depreciation expense was understated by ¥4,000,000. In 2025, net income was ¥9,000,000 and dividends declared were ¥2,500,000. The tax rate is 40%. Prepare a 2025 retained
BE21.6 (LO 3) In 2025, Bailey SA discovered that equipment purchased on January 1, 2023, for€50,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no residual value, using straight-line depreciation. The effective tax rate is 30%. Prepare Bailey’s 2025
BE21.5 (LO 2) Sesame plc purchased a computer system for £74,000 on January 1, 2023. It was depreciated based on a 7-year life and an £18,000 residual value, using straight-line depreciation. On January 1, 2025, Sesame revised these estimates to a total useful life of 4 years and a residual value
BE21.4 (LO 2) Tedesco Company changed depreciation methods in 2025 from double-decliningbalance to straight-line. Depreciation prior to 2025 under double-declining-balance was $90,000, whereas straight-line depreciation prior to 2025 would have been $50,000. Tedesco’s depreciable assets had a

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Intermediate Accounting IFRS International Adaptation 5th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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