Questions and Answers of Intermediate Accounting

Explain how the separation of ownership and management creates moral hazard, and how accounting information helps to alleviate this moral hazard.
When a bank lends money to a company, moral hazard arises. Describe the detrimental effects of moral hazard in this context, and explain how accounting information can be valuable in alleviating this
Agency problems arise from the inability of the principals to monitor the agents to ensure that the agents make decisions in the best interests of the principals. Briefly explain how this statement
Identify whether each of the following is most likely a case of adverse selection or moral hazard and briefly explain why.a. A mortgage company intends to sell pools of loans (mortgages) to investors
On April 24, 2008, The Economist news magazine published an article entitled, “Gattaca! Gattaca!” in reference to a 1997 movie of that name, in which a genetically inferior man takes on the
Explain why accounting reports are useful to investors even if securities markets are efficient in the semi-strong form.
In the past, accounting standards in Canada required intangible assets to be recorded at purchase cost if they were purchased from a market transaction. Costs incurred on internally generated
IFRS, ASPE, and US GAAP each have a conceptual framework. Explain why a conceptual framework is necessary for a set of high quality accounting standards. Provide three reasons by considering the
Identify the three essential characteristics that define an asset, one of the key elements of financial statements.
Douglas Décor Company (DDC) is a private decoration company that has been in business for over 25 years in the Montreal area. Two brothers, Doug and Dez, established the company and have made it
Identify the three essential characteristics that define a liability, one of the key elements of financial statements.
Companies often invest significant amounts of time and money in training their employees, whether the company engages in manufacturing, retail, or professional services. Accounting standards
On October 13, 2010, The Globe and Mail reported that Google is using the information from its search engine as economic indicators. Entitled “Google’s Price Index to Measure Inflation of Online
The September 17, 2011, issue of The Economist contained a short article called “The R-word Index: Up Means Down.”At the time, the developed world was facing a combination of anemic growth, high
The application of the IFRS Conceptual Framework in relation to specific standards in IFRS has several similarities compared with the application of constitutional law in relation to specific statute
In January 2000, in an article in The New York Times, Andrew Pollack described the world’s first treaty regulating trade of genetically modified products. The treaty, established between 130
The CPA Canada Handbook is available to most post-secondary students through their educational institution’s subscription. Visit http://edu.knotia.ca to complete this exercise. (You may need to
The CPA Canada Handbook is available to most post-secondary students through their educational institution’s subscription. Visit http://edu.knotia.ca to complete this exercise. (You may need to
The CPA Canada Handbook is available to most post-secondary students through their educational institution’s subscription. Visit http://edu.knotia.ca to complete this exercise. (You may need to
The CPA Canada Handbook is available to most post-secondary students through their institution’s subscription. Visit http://edu.knotia.ca to complete this exercise. (You may need to complete this
Obtain the annual report for Bombardier Inc. for the fiscal year ended December 31, 2011, either through the company’s website or through SEDAR (www.sedar.com).Required:a. For revenue recognition
Oshawa Motors is a car dealership that has two types of operations: car sales and service. The two divisions operate independently and, in fact, the showroom for car sales is entirely separate from
Smarty Phones is a company that provides cellular phone sales and services. The company offers different packages to suit different customers. For example, for one model of phone, the Raspberry 300,
The Royal Elbonian Yacht Club (REYC) is an association of members that offers a number of services: community and friendship among members, sailing courses for its members, meals in its restaurant,
Electronics Inc. (EI) manufactures and sells a computer tablet with two warranty packages available. The first package guarantees that the tablet will be free from manufacturing defects for two
Schott Construction is the contractor for a building project for an educational institution. The project was scheduled to be completed over three years from 2012 to 2014. The contracted price was $80
South Olympia Systems (SOS) has a long-term project to install a complex information system for a client. The project has a contract price of $40 million, and it was scheduled to be completed over
Fraternal Brothers provides consulting services on contract for a standard hourly rate of $100 per hour. The contracts allow the company to invoice the client evenly during the contract period. The
Obtain the 2013 financial statements for Thomson Reuters Corporation either through the company’s website or through SEDAR (www.sedar.com).Required:a. In addition to the general requirements for
Refer to the financial report for Canadian Tire Corporation for the fiscal year ended December 31, 2013 in Appendix D.Required:a. Note 3 of the financial statements describes the company’s
Tenth Cup, a coffee retail chain, offers its customers a loyalty card whereby customers can receive their choice of drink free of charge after purchasing nine cups of coffee. Prices for small,
The following table presents summarized financial statements for Whiskey Golf Ltd., in $000€™s.In addition, you also know that the company declared and paid $80,000 of dividends on
A friend of yours is the president of Maple Imports Ltd. The company sells and services cars imported from Korea. Maple has just completed its first year of operations. The following balance sheet
Refer to the financial statements for Canadian Tire Corporation in Appendix D and answer the following questions:a. Where do you find operating expenses listed according to their nature (source)?
Modern Electronics Inc. (MEI) is a retailer that sells televisions, audio systems, computers, gaming consoles, related accessories, and appliances such as washing machines. Since its founding in the
The following disclosure is from Note 5 of the 2013 financial statements for BMW Group, the German automaker:Revenues from the sale of products are recognized when the risks and rewards of ownership
List and briefly describe the purpose of each of the five steps involved in the revenue recognition process.
Patricia Leather Company (PLC) is a small private company located in Montreal. The company was established five years ago and has become increasingly popular with small local stores, which have been
Mowers Unlimited Inc. (MUI) manufactures and distributes lawnmowers. To promote the sale of a new mower type, MUI offered a mail-in rebate to retail purchasers of $50 per mower. Pertinent details
A car manufacturer provides a service-type warranty for five years on sales of new vehicles. The following table provides information relating to two car models the company produces and
Refer to the facts presented in the previous problem (P4-10). Data from P4-10 A car manufacturer provides a service-type warranty for fi ve years on sales of new vehicles. The following table
Sleep King Manufacturing Company (SKMC) is a public manufacturing company specializing in the fabrication of mattresses. The company has been operating from its headquarters in Toronto since 1995.
Refer to the example of Tradewinds Company illustrated by the timeline in Exhibit 3-2 and the facts given at the beginning of Section B, €œAccrual versus Cash Accounting.€ In
Computer Consulting Limited was started in early 2016 and continued to operate until early 2012, when it was wound up due to disputes between the two principal owners. When it started, the company

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