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modern advanced accounting

Questions and Answers of Modern Advanced Accounting

Assume that all of the facts in Problem 1 remain unchanged except that MEl uses hedge accounting. Also, assume that the forward element and spot elements on the forward contract are accounted for
ZIM Inc. (ZIM) is a high-technology company that develops, designs, and manufactures telecommunications equipment. ZIM was founded in Year 5 by Dr. Alex Zimmer, the former assistant head of research
If a foreign-currency-denominated payable has been hedged, why is it necessary to adjust the liability for balance sheet purposes?
What are some typical reasons for acquiring a forward exchange contract?
Differentiate between a spot rate and a closing rate.
Differentiate between a spot rate and a forward rate.
The following balance sheets have been prepared as at December 31, Year 6, for Kay Corp. and Adams Ventures:Additional Information:• Kay acquired its 40% interest in Adams for $374,000 in Year 2,
On January 1, Year 1, Amco Ltd. and Newstar Inc. formed Bearcat Resources, a joint venture. Newstar contributed miscellaneous assets with a fair value of $844,000 for a 65% interest in the venture.
The following are the Year 9 income statements of Kent Corp. and Laurier Enterprises.Additional Information:• Kent acquired its 40% interest in the common shares of Laurier in Year 3 at a cost of
Access the 2014 consolidated financial statements for Rogers Communications Inc. by going to the investor relations section of the company's website. Answer the questions below. For each question,
On January 1, Year 6, HD Ltd., a building supply company, JC Ltd., a construction company, and Mr. Saeid, a private investor, signed an agreement to carry out a joint operation under the following
On January 1, Year 5, Green Inc. purchased 100% of the common shares of Mansford Corp. for $353,000. Green's balance sheet data on this date just prior to this acquisition were as follows:The balance
Pharma Company (Pharma) is a pharmaceutical company operating in Winnipeg. It is developing a new drug for treating multiple sclerosis (MS). On January 1, Year 3, Benefit Ltd. (Benefit) signed an
Prepare the memo requested by the CFO. Ignore income taxes.P Co. is looking for some additional financing in order to renovate one of the company's manufacturing plants. It is having difficulty
(a) How should these two investments be reported on the financial statements of Holdco? Provide arguments to support your recommendations. (b) What impact will the adoption of the reporting
Explain how the definitions of assets and liabilities can be used to support the consolidation of special-purpose entities.
Explain the similarities and differences between a subsidiary and a controlled special purpose entity and between a majority shareholder for a subsidiary and a sponsor for a controlled
Dry Quick (DQ) is a medium-sized, private manufacturing company located near Timmins, Ontario. DQ has a June 30 year-end. Your firm, Poivre & Sel (P&S), has recently been appointed as
Prepare this presentation, answering the following questions:(a) How would Pepper's consolidated balance sheet differ at the date of acquisition under the two different valuation alternatives? Which
Explain how the non-controlling interest in the net assets and net income of a subsidiary is calculated and reported when the parent owns 90% of the subsidiary's common shares and 30% of the
On January 1, Year 4, Handy Company (Handy) purchased 70% of the outstanding common shares of Dandy Limited (Dandy) for $13,300. On that date, Dandy's shareholders' equity consisted of common shares
Shown below are selected ledger accounts from the trial balance of a parent and its subsidiary as of December 31, Year 10.Additional Information:• P Company purchased its 90% interest in S Company
On December 31, Year 4, RAV Company purchased 60% of the outstanding common shares of ENS Company for $1,260,000. On that date, ENS had common shares of $500,000 and retained earnings of $130,000. In
Parent Co. owns 75% of Sub Co. and uses the cost method to account for its investment. The following are summarized income statements for the year ended December 31, Year 7.Additional Information:•
On January 1, Year 4, Goodkey Co. acquired all of the common shares of Jingya. The condensed income statements for the two companies for January Year 5, were as follows:The following transactions
Hanna Corporation owns 80% of the outstanding voting stock of Fellow Inc. At the date of acquisition, Fellow's retained earnings were $2,100,000. On December 31, Year 2, Hanna Inc. sold equipment to
The comparative consolidated income statements of a parent and its 75%-owned subsidiary were prepared incorrectly as at December 31 and are shown in the following table. The following items were
It is Monday, September 13, Year 10. You, CPA, work at Fife & Richardson LLP, a CPA firm. Ken Simpson, one of the partners, approaches you mid-morning regarding Brennan & Sons Limited (BSL),
Stephanie Baker is an audit senior with the public accounting firm of Wilson & Lang. It is February Year 9, and the audit of Canadian Development Limited (CDL) for the year ended December 31,
Why does an intercompany sale of a depreciable asset (such as equipment or a building) require subsequent adjustments to depreciation expense within the consolidation process?
An intercompany gain on a depreciable asset resulting from a sale by the parent company is subsequently realized by an adjustment to the subsidiary's depreciation expense in the preparation of
(a) Show the allocation of the acquisition cost at acquisition and the related amortization schedule. Show and label all calculations.(b) Prepare a consolidated income statement with expenses
(a) Prepare the following consolidated financial statements for Year 6:(i) Income statement(ii) Statement of financial position(b) Calculate goodwill impairment loss and profit attributable to
(a) Prepare a consolidated income statement for Year 9 with expenses classified by nature.(b) Calculate consolidated retained earnings at December 31, Year 9.(c) If Road had used parent company
(a) Assume that all intercompany sales were upstream. Calculate the amount to be reported on the Year 7 consolidated financial statements for the following accounts/items:(i) Consolidated net
(a) Prepare income statements for January and February for Fazli, Gervais, and Consolidation. Break down cost of sales into its three components.(b) Now assume that Fazli uses the equity method to
On January 1, Year 2, PAT Ltd. acquired 90% of SAT Inc. when SAT's retained earnings were $1,000,000. There was no acquisition differential. PAT accounts for its investment under the cost method. SAT
Wedding Planners Limited (WP), owned by Anne and Francois Tremblay, provides wedding planning and related services. WP owns a building (the Pavilion) that has been custom-made for hosting weddings.
You, the CPA, an audit senior at Grey & Co., Chartered Professional Accountants, are in charge of this year's audit of Plex-Fame Corporation (PFC). PFC is a rapidly expanding, diversified, and
Good Quality Auto Parts Limited (GQ) is a medium-sized, privately owned producer of auto parts, which are sold to car manufacturers, repair shops, and retail outlets. In March Year 10, the union
Describe the journal entry on the parent's books under the equity method to adjust for unrealized profits in ending inventory for upstream transactions.
If an intercompany profit is recorded on the sale of an asset to an affiliate within the consolidated entity in Period 1, when should this profit be considered realized? Explain.
On January 2, Year 4, Brady Ltd. purchased 80% of the outstanding shares of Partridge Ltd. for $4,320,000. Partridge's statement of financial position and the fair values of its identifiable assets
The following financial statements were prepared on December 31, Year 6.Additional Information:Pearl purchased 80% of the outstanding voting shares of Silver for $3,300,000 on July 1, Year 2, at
On December 31, Year 2, Palm Inc. purchased 80% of the outstanding ordinary shares of Storm Company for $350,000. At that date, Storm had ordinary shares of $240,000 and retained earnings of $64,000.
On January 1, Year 4, Cyrus Inc. paid $914,000 in cash to acquire all of the ordinary shares of Fazli Company. On that date, Fazli's retained earnings were $200,000. All of Fazli's assets and
Peach Ltd. acquired 80% of the common shares of Cherry Company on January 1, Year 4. On that date, Cherry had common shares of $710,000 and retained earnings of $410,000.The following is a summary of
Large Ltd. purchased 70% of Small Company on January 1, Year 6, for $770,000, when the statement of financial position for Small showed common shares of $560,000 and retained earnings of $260,000. On
The following information is available for the assets of Saman Ltd. at December 31, Year 5:(The following 3 parts are independent situations.)Part A. Assume that the total fair value for all of
Calculate the following:(a) The amount of dividends declared by Cherry in Year 4(b) The reported profit of Cherry for Year 5(c) The amount for non-controlling interest that would appear in the Year 6
Prepare a consolidated balance sheet at the date of acquisition under the three theories, and respond to the questions asked by management.On December 31, Year 7, Maple Company issued preferred
How would the consolidation of a parent-founded subsidiary differ from the consolidation of a purchased subsidiary?
What is negative goodwill, and how is it accounted for?
Explain how changes in the fair value of contingent consideration should be reported, assuming that the contingent consideration will be paid in the form of cash.
What is non-controlling interest, and where is it reported in the consolidated balance sheet under the parent company extension and entity theories?
With respect to the valuation of non-controlling interest, what are the major differences among proprietary, parent company extension, and entity theories?
The financial statements for CAP Inc. and SAP Company for the year ended December 31, Year 5, follow:On December 31, Year 5, after the above figures were prepared, CAP issued $314,000 in debt and
Refer to Problem 11. All of the facts and data are the same except that in the proposed takeover, Myers Company will purchase all of the outstanding common shares of Norris Inc.Data from problem
Myers Company Ltd. was formed 10 years ago by the issuance of 34,000 common shares to three shareholders. Four years later, the company went public and issued an additional 30,000 common shares.The
The statement of financial position of Bagley Incorporated as at July 31, Year 4, is as follows:On August 1, Year 4, the directors of Bagley considered a takeover offer from Davis Inc., whereby the
G Company is considering the takeover of K Company whereby it will issue 7,400 common shares for all of the outstanding shares of K Company. K Company will become a wholly owned subsidiary of G
The trial balances for Walla Corporation and Au Inc. at December 31, Year 4, just before the transaction described below, were as follows:On December 31, Year 4, Walla purchased all of the
The balance sheets of Abdul Co. and Lana Co. on June 30, Year 2, just before the transaction described below, were as follows:On June 30, Year 2, Abdul Co. purchased all of Lana Co. assets and
You, CPA, are employed at Beaulieu & Beauregard, Chartered Professional Accountants. On November 20, Year 3, Dominic Jones, a partner in your firm, sends you the following email:Our firm has been
Prepare the presentation slides and related speaker's notes for the presentation. Limit your presentation to five slides. Your presentation should provide recommendations related to the issues raised
Can a statutory amalgamation be considered a form of business combination? Explain.
What key element must be present in a business combination?
Right Company purchased 25,000 common shares (25%) of ON Inc. on January 1, Year 11, for $250,000. Right uses the equity method to report its investment in ON because it has significant influence in
On January 1, Year 2, Grow Corp. paid $200,000 to purchase 20,000 common shares of UP Inc., which represented an 8% interest in UP. On December 27, Year 2, UP declared and paid a dividend of $0.50
Her Company purchased 22,000 common shares (20%) of Him Inc. on January 1, Year 4, for $374,000. Additional information on Him for the three years ending December 31, Year 6, is as follows:On
Pender Corp. paid $285,000 for a 30% interest in Saltspring Limited on January 1, Year 6. During Year 6, Saltspring paid dividends of $110,000 and reported profit as follows: Profit before
(a) Assume that Blake is a public company and the number of shares held by Blake is enough to give it significant influence over Stergis. Prepare all the journal entries that Blake should make
It is January 20, Year 13. Mr. Neely, a partner in your office, wants to see you, CPA, about Bruin Car Parts Inc. (BCP), a client req_uiring assistance. BCP prepares its financial statements in
Ashton Inc. acquired a 40% interest in Villa Corp. for $200,000. In the first year after acquisition, Villa reported a loss of $700,000. Using the equity method, how should Ashton account for this
Distinguish between the financial reporting for FVTPL investments and that for investments in associates.
Briefly describe the trend in reporting of investments in equity securities over the past 12 years.
When writing the final case report, how much attention, if any, should be given to discussing alternatives?
Identify the main factors to be used when ranking the importance of issues to be resolved.
Explain the difference between report recipient and primary users as they are described in the framework for analyzing a case and which users should be given priority in financial reporting.
List the six steps of the case framework.
In Year 1, XZY Co. expensed all development costs as incurred. How would the current ratio, debt-to-equity ratio and return on eq_uity change if XZY Co. had capitalized the development costs?
Identify the financial statement ratios typically used to assess profitability, liquidity and solvency, respectively.
For the items listed in Exhibit 1.1, for which items would the debt-to-equity ratio not change when a company switched from ASPE to IFRS?Exhibit 1.1:Some key different between IFRS and ASPE
Identify some of the financial statement items for which ASPE is different from IFRS.
Briefly explain why a Canadian private company may decide to follow IFRS even though it could follow ASPE.
Briefly explain why the Canadian AcSB decided to create a separate section of the CPA Canada Handbook for private enterprises.
Explain whether the needs of external users or management should take precedence in GAAP-based financial statements.
Identify three main areas where judgment needs to be applied when preparing financial statements.
Prepare a schedule to convert net income and total shareholders' equity from the preliminary financial statements amounts to amounts under ASPE and IFRS. Where accounting choices exist, choose
(a) Determine the amount at which Fast should report each of the following on its balance sheet at December 31, Year 2, using (1) IFRS and (2) ASPE. Ignore the possibility of any additional
Goal Products Limited (GPL) is the official manufacturer and distributor of soccer balls for the North American League Soccer (NALS), a professional soccer association. GPL is a private company. It
(a) As John McCurdy, outline the initial approach that you will take in order to determine the reasons for the differences in the numbers. (b) List some of the obvious items that need
Using basic accounting principles as a guide, provide arguments to supportThe IASB approach for reporting R&D costs, andThe ASPE approach for reporting R&D costs.In this era of rapidly

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