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intermediate accounting

Questions and Answers of Intermediate Accounting

Golf for Life Inc. issues three series of $1,000,000 six-year bonds dated January 1, 2018, on the issue date. Interest is payable on June 30 and December 31 each year. Series A has a coupon rate of
Adler Corp. issued $4,000,000 of 10-year, 4.5% bonds on January 1, 2018, at par. Interest is due annually on December 31. The market rate of interest has since increased dramatically to 8%. As such,
Escape to Egypt Travel Inc. issues $4,000,000 of five-year, 4% bonds dated January 1, 2021. Interest is payable on January 1 and July 1 each year. The proceeds realized from the issue were the
Really Really Cheap Vacations Ltd. issues $2,000,000 of five-year, 5% bonds dated January 1, 2021. Interest is payable on January 1 and July 1 each year. The proceeds realized from the issue were the
Buy Low Sell High Corp. issues bonds to finance the acquisition of marketable securities. On January 1, 2019, Buy Low sells $1,000,000 in three-year, 5% bonds for $970,000. Interest is payable on
Outstanding Accountants Co. sells $1,000,000 of 10-year, 4% bonds priced to yield 3.9%. The bonds are dated and issued on January 1, 2018. Interest is payable on January 1 and July 1 each year.
Cloverdale Country Rodeo Inc. (CCRI) sells $1,000,000 of 10-year, 6% bonds for $980,500 plus accrued interest. The bonds are dated January 1, 2021, but due to market conditions are not issued until
In the Burbs Ltd. (ITBL) sells $5,000,000 of eight-year, 4% bonds for $5,009,400 plus accrued interest. The bonds are dated January 1, 2018, but due to market conditions are not issued until March 1,
Exclusive Golf Vacations sells bonds to friends and families to finance the acquisition of a small tropical island on which it intends to build a golf resort. On January 1, 2018, the company sells
You are the accountant for Simply the Best Fireworks. The company has been negotiating with various car dealers in an attempt to get the best deal on a new Vroom Vroom XKY. The purchasing manager
Jane’s Steel Inc. sells bonds to the investing public to finance the acquisition of a new foundry. On July 1, 2018, the company sells $8,000,000 of 3% bonds priced to yield 3.5% for $7,887,020. The
You are the chief financial officer for Outstanding Interiors Ltd. The company has been negotiating with suppliers in an attempt to get the best deal on a new data management system. Three suppliers
On January 1, 2018, Jakeman’s Chiropractic Corp. (JCC) borrowed €100,000 from its bank. JCC signed a note payable due on December 31, 2019. Pertinent details follow:■ The interest rate on the
Stanger Corp. purchases a new automobile and takes advantage of a low interest rate loan offered by the manufacturer’s financing division. Stanger buys the car on July 1, 2018, paying $10,000 cash
There are three independent situations summarized below. In all three cases the bonds are sold on January 1, 2018, and the issuing company has a December 31 year-end. In Situation 3, the bonds were
On January 1, 2018, Marianne’s Massage Inc. (MMI) issued US$5,000,000 of five-year bonds at par that matured on December 31, 2022. Pertinent details follow:■ The coupon rate on the bonds was 6%
Legally Yours, a law firm, sells $5,000,000 of four-year, 6% bonds priced to yield 4.2%. The bonds are dated January 1, 2018, but due to some regulatory hurdles are not issued until March 1, 2018.
On July 1, 2018, Inuvialuit Golf Corp. issued $5,000,000 of five-year, 6%, semi-annual bonds for $5,040,000. At time of issue, Inuvialuit paid its investment bank a $40,000 sales commission. On July
Fredericton Aerospace Inc. raised $10,500,000 by selling $10,000,000 of six-year, 4% bonds dated January 1, 2021. Fredericton used part of the proceeds to pay its investment bank’s fee of $400,000
On March 15, 2018, Candoit Inc. sold $10,000,000 of five-year, 3% bonds for $9,972,469. From the proceeds, Candoit paid its investment bank a $200,000 sales commission. Interest is payable
Two independent situations follow:1. On January 1, 2018, Cute Koalas Inc. issued $4,000,000 of 7%, 12-year, callable bonds priced to yield 6%. The bonds may be called at 102 on or after December 31,
Two independent situations follow:1. On January 1, 2018, Alligator Inc. issued $6,000,000 of 5%, eight-year, callable bonds priced to yield 6%. The bonds may be called at 101 on or after December 31,
Three independent situations follow:1. I’m Alive Ltd. (IAL) issued $5,000,000 in stripped (zero-coupon) bonds that mature in 10 years. The market rate of interest for bonds of a similar nature is
Three independent situations follow:1. Second Time Around Corp. (STAC) issued $7,000,000 in stripped (zero-coupon) bonds that mature in eight years. The market rate of interest for bonds of a similar
On April 1, 2019, Illustrious Inc. sold $8,000,000 of four-year, 4% bonds for $8,298,101. From the proceeds, Illustrious paid its investment bank a $150,000 sales commission. Interest is payable
a. What is offsetting? When is it allowed? What are some benefits to the company of offsetting?b. What is in-substance defeasance? When do defeasance arrangements qualify for offsetting?
Mississauga Wheels Ltd. (MW) sold $5,000,000 of five-year, 6% bonds at par on January 1, 2021. Interest is payable on June 30 and December 31 each year. The bonds can be called at any time at 101
Meagan’s Metals Corp. (MMC) has been granted a licence to use an abandoned limestone quarry as a dump for old and abandoned motor vehicles. The terms of the licence require MMC to replace the mined
Jane’s Oil Inc. (JOI) installed an offshore oil drilling platform. The terms of the government’s approval to drill requires JOI to dismantle and remove the platform upon completion of drilling.
Refer to part (a) of problem P12-43. At the beginning of Year 6, JOI determined that the appropriate market-based interest rate for this obligation was 5%. JOI depreciates the asset on a
List five types of disclosures made regarding companies’ indebtedness.
Refer to problem P12-45. Assume that SCMI elects to report its financial results in accordance with Accounting Standards for Private Enterprises (ASPE).Problem P12-45During 2021, Surinder’s Copper
During 2021, Surinder’s Copper Mine Inc. (SCMI) built the infrastructure for an open pit copper mine in a remote area in Northern British Columbia at a total cost of $20 million, paid in cash. The
Identify whether the following statements are true or false. Statement a. Common (ordinary) shares have priority over preferred shares. b. A share with cumulative dividends must be a preferred
Refer to problem P12-45. At the beginning of 2028, SCMI determined that the appropriate market-based interest rate for this obligation was 4%. Management determined that the revised book value of the
Identify whether the following statements are true or false. Statement a. The number of shares issued > number outstanding > number authorized. b. A share with a fixed dividend rate (i.e., a
Refer to the 2016 financial statements for Canadian Tire Corporation in Appendix C.Required:a. What was the amount of long-term liabilities reported in Canadian Tire’s financial statements as at
Peterborough Printers specializes in high-volume reproduction of advertising leaflets, such as those distributed by direct mail or inserted in newspapers. Located in Scarborough and founded by Peter
Having a cumulative dividend is a common feature of preferred shares.Required:a. What does it mean to have a cumulative dividend feature?b. Why do preferred shares commonly have this feature?c. Can
Preferred shares are defined as being a form of equity by the Canada Business Corporations Act (CBCA). Preferred shares generally have a specified dividend rate and in the event of bankruptcy or
Which of the following are accounts reported in the equity section of the balance sheet? Account Preferred shares Investment in Company A common shares Accumulated other comprehensive income Equity
A major objective of IFRS is to harmonize accounting rules and procedures around the world. Yet for the details and specifics of accounting for equity accounts (e.g., repurchase of the company’s
Which of the following are accounts reported in the contributed capital section of equity? Account Common shares Retained earnings Preferred shares Accumulated other comprehensive income Appropriated
For accounting purposes, of the following characteristics, which distinguish a common share from a preferred share? Explain your answer briefly.■ The share has no par value.■ The share has voting
Which of the following transactions have the potential to directly affect the retained earnings portion of equity? Exclude indirect effects such as the transfer of income into retained earnings at
Financial reporting distinguishes equity into two broad components: contributed capital and accumulated income; the latter is further separated into retained earnings and accumulated other
When shares are repurchased and cancelled at more than their original issue price, the journal entry to record the retirement potentially includes which of the following components? Account Debit to
Lisa’s Yoga Inc., a publicly accountable enterprise, issued 1,000 no par value common shares to a supplier in full payment for machinery that normally sells for $50,000. Lisa’s Yoga Inc.’s
Storoshenko Corp. (SC) is a private corporation that elects to report its financial results in accordance with ASPE. SC issued 2,000 no par value common shares to a scientist in exchange for a
Wedding Boutique Corp. sells 20,000 no par value common shares for $20 each to employees on a subscription basis. Terms of the sale require the employees to pay $12 on contract signing and the
Walt’s Antique Cars Inc. issued equity securities. The offering included 100,000 bundles of one no par value common share and one no par value preferred share. Each bundle sold for $50. Walt’s
In January 2021, Rita Inc. sells 50,000 no par value common shares for $20 each to the investing public on a subscription basis. Terms of the sale require the investors to pay $11 on contract
Shangri-La Inc. raised additional capital by selling equity to investors. The package of securities included one no par value common share, one cumulative Class A preferred share, and one
Accounting standards do not permit the recognition of capital transactions (those involving owners acting as owners) to flow through net income. Explain why accounting standards prohibit the
When a corporation engages in a capital transaction (those relating to its contributed capital), the journal entry may involve either a debit or a credit to contributed surplus. While not permitted
Belmont Corporation has a December 31 year-end. On December 15, 2021, the board of directors declared a cash dividend of $0.50 per common share, payable on January 30, 2022. The date of record for
Cambridge Corp. has a single class of shares. As at its year ended December 31, 2021, the company had 2,500,000 shares issued and outstanding. On the stock exchange, these shares were trading at
Cardiff Corporation is a public company traded on a major exchange. Cardiff ’s common shares are currently trading at $20 per share. The board of directors is debating whether to issue a 25% stock
Refer to the 2016 financial statements for Canadian Tire Corporation in Appendix C.Required:a. What was the amount of equity reported in Canadian Tire’s financial statements as at December 31,
Mark Corporation declared and distributed a 5% stock dividend. Mark had 400,000 common shares outstanding and 1,000,000 common shares authorized before the stock dividend. The board of directors
As of January 1, 2021, the equity section of GFF Educational Inc.’s balance sheet contained the following:■ On March 1, 2021, GFF repurchased and cancelled 1,000 preferred shares at $120 per
Jamie Bleay Inc. (JBI) has an at fair value through profit or loss investment in which it owns 200,000 common shares of Richard Ramey Ltd. (RRL). JBI distributes its shareholding in RRL by way of a
Peter Quitzau Inc. (PQI) owns 200,000 common shares of Margaret Thornton Ltd. (MTL), a private company. PQI distributes its shareholding in MTL to PQI’s shareholders by way of property dividend.
As of January 1, 2021, the equity section of Gail and Samson Inc.’s balance sheet contained the following:■ Dividends were last paid in 2018. There were no arrears at that time.■ On February 1,
As of January 1, 2019, the equity section of BC Marine Co.’s balance sheet contained the following:■ On May 1, 2019, the company spent $500,000 to repurchase 100,000 common shares. These shares
Ron Tidball Corp. (RTC) owns 100,000 shares in Scott Austin Ltd. (SAL). RTC distributes its shareholding in SAL by way of a property dividend. Other information follows:■ The current book value of
Fenwick Ltd. began operations in 2016. Its fiscal year-end is December 31. Components of the condensed balance sheet as at December 31, 2018, are as follows:During 2019, Fenwick had the following
Below are details relating to balances for the equity accounts of Barrie Company and changes to those balances (note that AOCI is accumulated other comprehensive income).Required:Prepare a statement
Below are details relating to balances for the equity accounts of PICSR Company and changes to those balances (note that AOCI is accumulated other comprehensive income).Required:Prepare a statement
Della’s Garden Delight Corp.’s capital structure includes the following equity instruments:■ No par value common shares, 2,000,000 shares issued and outstanding■ Class A, non-cumulative
Below are details relating to balances for the equity accounts of Mark’s Photography Company and changes to those balances (note that AOCI is accumulated other comprehensive
When shares are repurchased at more than their original issue price, then held in treasury or cancelled, the journal entry potentially includes which of the following components? Account Debit to
When shares are repurchased and held in treasury, and the purchase is at more than the original issue price, the journal entry to record the repurchase potentially includes which of the following
Utopia Is A Destination Inc. had the following shareholders’ equity account balances on December 31, 2021:During 2022, the following transactions occurred:i. March 1: Utopia resold 500 of the
Canada and many other countries discourage and even prohibit the use of “par value” for common shares because it could be a misleading label.Required:Why is the term “par value” for common
Liway’s Cleaning Emporium Corp. had the following shareholders’ equity account balances on December 31, 2021:During 2022, the following transactions occurred:i. February 1: Liway’s resold the
Canaan Corp. (CC) is a private corporation that elects to report its financial results in accordance with ASPE. On January 1, 2021, CC, a newly incorporated company, issued (sold) 10,000, $2 par
Belle Ltd. (BL) is a private corporation that elects to report its financial results in accordance with ASPE. On January 1, 2021, BL, a newly incorporated company, issued (sold) 5,000, $10 par value,
Acton Company has two classes of shares that were both issued on January 1, 2019:■ Class A, $100 par value, 5% preferred shares, 100,000 shares issued and outstanding■ Class B, no par value
Drayton Inc. was incorporated under provincial legislation with a December 31 year-end. The company has a single class of shares. As at December 31, 2020, it had 200,000 shares issued and
Refer to the facts for Drayton Inc. presented in problem P13A-42.Problem P13A-42.Drayton Inc. was incorporated under provincial legislation with a December 31 year-end. The company has a single class
Stanger’s Secure Storage Inc.’s capital structure includes the following equity instruments:■ No par value common shares, 1,000,000 shares issued and outstanding■ Class A, $100 par value, 4%
As of January 1, 2021, the equity section of Smokey The Cat Corp.’s balance sheet contained the following:■ Smokey uses the single-transaction method to account for treasury shares.■ Dividends
The following is an extract from the balance sheet of Devlin Ltd. as at December 31, 2021:The company did not declare dividends on preferred shares in 2021. Transactions in 2022 include the
Hamilton Holdings had the following balances in shareholders’ equity as at December 31, 2021:In addition, the financial statement notes on this date indicated that two years of preferred share
The following balances were taken from the books of Maria Conchita Alonzo Corp. on December 31, 2014.
Two accountants for the firm of Elwes and Wright are arguing about the merits of presenting an income statement in a multiple-step versus a single-step format. The discussion involves the following
The financial records of LeRoi Jones Inc. were destroyed by fire at the end of 2014. Fortunately, the controller had kept certain statistical data related to the income statement as follows.1. The
Presented below is information related to Viel Company at December 31, 2014, the end of its first year of operations.Sales revenue
Using the information from BE4-9, prepare a retained earnings statement for the year ended December 31, 2014. Assume an error was discovered: land costing $80,000 (net of tax) was charged to
Portman Corporation has retained earnings of $675,000 at January 1, 2014. Net income during 2014 was $1,400,000, and cash dividends declared and paid during 2014 totaled $75,000. Prepare a retained
Vandross Company has recorded bad debt expense in the past at a rate of 1½% of net sales. In 2014, Vandross decides to increase its estimate to 2%. If the new rate had been used in prior years,
Finley Corporation had income from continuing operations of $10,600,000 in 2014. During 2014, it disposed of its restaurant division at an after-tax loss of $189,000. Prior to disposal, the division
Brisky Corporation had net sales of $2,400,000 and interest revenue of $31,000 during 2014. Expenses for 2014 were cost of goods sold $1,450,000; administrative expenses $212,000; selling expenses
Cooper Investments reported an unusual gain from the sale of certain assets in its 2014 income statement. How does intraperiod tax allocation affect the reporting of this unusual gain?
Indicate where the following items would ordinarily appear on the financial statements of Boleyn, Inc. for the year 2014. (a) The service life of certain equipment was changed from 8 to 5
Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2015. What is the date of Becker’s opening balance sheet, assuming one year of comparative
The financial statements of Marks and Spencer plc (M&S) are available at the book’s companion website or can be accessed at
Recording transactions in the accounting system requires knowledge of the important characteristics of the elements of financial statements, such as assets and liabilities. In addition, accountants
The Amato Theater is nearing the end of the year and is preparing for a meeting with its bankers to discuss the renewal of a loan. The accounts listed below appeared in the December 31, 2014, trial

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