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principles financial accounting
Intermediate Financial Accounting Volume 1 1st Edition Glenn Arnold, Suzanne Kyle, Lyryx Learning - Solutions
On February 1, 2020, Sterling Structures Ltd. signed a $3.5 million contract to construct an office and warehouse for a small wholesale company. The project was originally expected to be completed in two years, but difficulties in hiring a sufficient pool of skilled workers extended the completion
Take the same set of facts as described in the previous question, except assume that there is no reasonable way to estimate progress on the contract.Required:a. Using the zero-margin method (IFRS), determine the amount of revenue and expense to report each year.b. Using the completed-contract
Describe cash and receivables, and explain their role in accounting and business.
Describe cash and cash equivalents, and explain how they are measured and reported.
Explain the purpose and key activities of internal control for cash.
Describe receivables, identify the different types of receivables, explain their accounting treatment, and prepare the relevant journal entries.
Describe accounts receivable, and explain how they are initially and subsequently measured and reported.
Describe notes receivables, and explain how they are initially and subsequently measured and reported.
Describe derecognition of receivables and the various strategies businesses use to shorten the credit-to-cash cycle through sales of receivables or borrowings secured by receivables.
Describe how receivables are disclosed on the balance sheet and in the notes.
Identify the different methods used to analyze cash and receivables.
Explain the differences between IFRS and ASPE for recognition, measurement, and reporting for cash and receivables.
Below is a list of various items. For each item, determine the amount that should be reported as cash or cash equivalent. For all other items, identify the proper disclosure.a. Chequing account balance $600,000b. Short-term (60-day) treasury bills $22,000c. Cash advance received from a customer
Below is financial information for Overachiever Ltd. The company’s year-end is December 31.i. A commercial savings account with $575,000 and a commercial chequing account with $450,000 are held at First Royal Bank. There is also a bank overdraft of$150,000 in a chequing account at the Lemon Bank.
Amy Glitters Ltd. provides you with the following information about its accounts receivable at December 31, 2020:Due from customers, of which $30,000 has been pledged as security for a bank loan $275,000 Instalment accounts due after December 31, 2021 50,000 Advances to employees 2,500 Advances to
From July 1 to August 30, 2020, Busy Beaver Ltd. completed the following transactions:On July 1, Busy Beaver sold 40 computers at a unit price of $3,000 to Heintoch Corp., terms 1/15, n/30. Average cost for these computers was $1,500. Busy Beaver also paid the freight costs of $3,200 cash. On July
The following information is available for Inverness Ltd.’s second year in business:• Opening merchandise inventory is $35,000.• Goods are marked to sell at 35% above cost.• Merchandise purchased totalled $600,000.• Collections from customers are $420,000.• Ending merchandise inventory
The trial balance before adjustment of Cyncrewd Inc. shows the following balances:Required:a. Give the entry for bad debt expense for the current year assuming:• The allowance should be 4% of gross accounts receivable.• Historical records indicate that based on accounts receivable aging the
At January 1, 2020, the credit balance of Reimer Corp.’s allowance for doubtful accounts was $575,000. During 2020, the bad debt expense entry was based on a percentage of net credit sales. Net sales for 2020 were $16 million, of which 75% were on account.Based on the information available at the
On May 1, 2020, Effix Ltd. provided services to Harper Inc. in exchange for Harper’s$336,000, five-year, zero-interest-bearing note. The implied interest is 8%. Effix’s yearend is December 31.Required:a. Prepare Effix’s entries for the note, the interest entries over the five years and the
Below are three unrelated scenarios:i. On July 1, a one-year note for $120,000 was accepted in exchange for an unpaid accounts receivable for $120,000. Interest for 5% would be payable at maturity.ii. On July 1, a one-year non-interest-bearing note for $110,250 was accepted in exchange for an
On January 1, Harrison Corp. sold used vehicles with a cost of $78,000 and a carrying amount of $12,600 to Aberdeen Ltd. in exchange for a $18,000, four-year non-interestbearing note receivable. The market rate of interest for a note of similar risk is 7.5%.Harrison follows IFRS and has a year-end
On July 1, 2020, Helim Ltd. assigns $800,000 of its accounts receivable to Central Bank of Tasmania as collateral for a $500,000 loan that is due October 1, 2020. The assignment agreement calls for Helim to continue to collect the receivables. Central Bank assesses a finance fee of 3.5% of the
Browing Sales Ltd. sells $1,450,000 of receivables with a fair value of $1,500,000 to Finnish Trust in a securitization transaction that meets the criteria for a sale. Browing receives the full fair value of the receivables and agrees to continue to service them. The fair value of the service
Jertain Corporation factors $800,000 of accounts receivable with Holistic Financing Inc.on a with recourse basis. Holistic Financing will collect the receivables. The receivable records are transferred to Holistic Financing on February 1, 2020. Holistic Financing assesses a finance charge of 2.5%
On July 1, 2020, Brew It Again Ale Co. sold excess land in exchange for a three-year, non-interest-bearing promissory note in the face amount of $530,000. The land’s carrying value is $250,000.On September 1, Brew It Again Ale rendered services in exchange for a six-year promissory note having a
The following information below relates to Corvid Company for 2020:• The beginning of the year net Accounts Receivable balance was $123,000.• Net sales for the year were $1,865,000. Credit sales were 54.8% of the total sales and no cash discounts are offered.• Collections on accounts
Jersey Shores Ltd. sold $1,250,000 of accounts receivable to Fast Factors Inc. on a without recourse basis. The transaction meets the criteria for a sale, and no asset or liability components of the receivables are retained by Jersey Shores. Fast Factors charges a 3.5% finance fee and retains
Opal Co. Ltd. transfers $400,000 of its accounts receivable to an independent trust in a securitization transaction on July 11, 2020, receiving 95% of the receivables balance as proceeds. Opal will continue to manage the customer accounts, including their collection.Opal estimates this obligation
Define inventory and identify those characteristics that distinguish it from other assets.
Identify the types of costs that should be included in inventory.
Identify accounting issues and treatments applied to inventory subsequent to its purchase.
Describe the differences between periodic and perpetual inventory systems.
Identify the appropriate criteria for selection of a cost flow formula and apply different cost flow formulas to inventory transactions.
Determine when inventories are overvalued and apply the lower of cost and net realizable value rule to write-down those inventories.
Describe the presentation and disclosure requirements for inventories under both IFRS and ASPE.
Identify the effects of inventory errors on both the balance sheet and income statement and prepare appropriate adjustments to correct the errors.
Calculate estimated inventory amounts using the gross profit method.
Calculate gross profit margin and inventory turnover period and evaluate the significance of these results with respect to the profitability and efficiency of the business’s operations.
Identify differences in accounting for inventories between ASPE and IFRS.
Identify which of the following costs of a product manufacturer would be included in inventories:• Salaries of assembly line workers• Raw materials• Salary of factory foreman• Heating cost for the factory• Miscellaneous supplies used in production process• Salary of the CEO• Costs to
Complete the following table by identifying whether the seller (S) or the purchaser (P) is the appropriate response for each cell. Owns the goods while in transit Is responsible for the loss if goods are damaged in transit Pays for the shipping costs FOB Shipping FOB Destination
Hasselbacher Industries Ltd. has fixed production overhead costs of $150,000. In a normal year, the company produces 100,000 units of product, which results in a fixed overhead allocation of $1.50 per unit.Required:a. If the company produces 105,000 units in a year, how much total fixed overhead
Segura Ltd. operates a small retail store that sells guitars and other musical accessories.During the month of May, the following transactions occurred:Required: Segura Ltd. uses a perpetual inventory system. Using the FIFO cost flow assumption, calculate the cost of goods sold for the month of May
Refer to the information in the previous question.Required: Assume that Segura Ltd. uses the moving average cost flow assumption instead. Calculate the cost of goods sold for the month of May and the inventory balance on May 31.
The following chart for Severn Ltd. details the cost and selling price of the company’s inventory:Required:a. Assume that grouping of inventory items is not appropriate in this case. Apply the lower of cost and net realizable value test and provide the required adjusting journal entry.b. Assume
Hawthorne Inc. identified the following inventory errors in 2020.a. Goods were in transit from a vendor on December 31, 2020. The invoice cost was$82,000 and the goods were shipped FOB shipping point on December 27, 2020.The goods will be sold in 2021 for $135,000. The goods were not included in
Refer to the information provided in the previous question.Required:a. Assume the books are still open for 2020. Provide any required adjusting journal entries to correct the errors.b. How would the adjustments change if the books are now closed for 2020?
Wormold Industries suffered a fire in its warehouse on March 4, 2021. The warehouse was full of finished goods, and after reviewing the damage, management determined that inventory, with a retail selling price of $90,000, was not damaged by the fire.For the period from January 1, 2021, to March 4,
Bollen Custom Automobile Mfg. reported the following results (all amounts are in millions USD):Inventories at the end of 2018 were $1,239.Required: Using the data above, analyze the profitability and efficiency of the company with respect to its core business activities. Provide any points for
Describe intercorporate investments and their role in accounting and business.
Identify and describe the three types of non-strategic investments.
Fair value through net income (FVNI) classification and accounting treatment.
Fair value through OCI (FVOCI) classification and accounting treatment.
Amortized Cost (AC) classification and accounting treatment.
Identify and describe the three types of strategic investments.
Investments in associates classification and accounting treatment.
Investments in subsidiaries classification and accounting treatment.
Investments in joint arrangements general overview.
Explain disclosures requirements for intercorporate investments.
Identify the issues for stakeholders regarding investment analyses of performance.
Discuss the similarities and differences between IFRS and ASPE for the three non-strategic investment classifications.
On January 1, Maverick Co. purchased 500 common shares of Western Ltd. for $50,000 plus a 1% commission of the transaction. On September 30, Western declared and paid a cash dividend of $2.25 per share. At year-end, the fair value of the shares was $108 per share. In early March of the following
On January 1, 2020, Smythe Corp. invested in a 10-year, $25,000 face value 4% bond, paying $25,523 in cash. Interest is paid annually, every January 1. On January 3, 2028, Smythe sold all of the bonds for 101. Smythe’s year-end is December 31 and the company follows IFRS. At the time of purchase,
On January 2, Terrace Co. purchased $100,000 of 10-year, 4% bonds from Inverness Ltd. for $88,580 cash. The effective interest yield for this transaction is 5.5%. The bonds pay interest on January 1 and July 1. Terrace’s business model is to hold and collect the contractual cash flows of interest
On January 2, Bekinder Ltd. purchased $100,000 of 10-year, 4% bonds from Colum Ltd.for $88,580 cash. The effective interest yield for this transaction is 5.5%. The bonds pay interest on January 1 and July 1. Terrace follows IFRS and classifies this investment as AC. Their year-end is September
On March 1, Imperial Mark Co. purchased 5% bonds with a face value of $20,000 for trading purposes. The bonds were priced in the trading markets at 101 to yield 4.87%, at the time of the purchase, and pay interest annually each July 1. At year-end on December 31, the bonds had a fair value of
Halberton Corp. purchased 1,000 common shares of Xenolt Ltd., a publicly traded company, for $52,800. During the year Xenolt paid cash dividends of $2.50 per share. At year-end, due to a temporary downturn in the market, the shares had a market value of$50 per share. Halberton’s business model is
The following are various transactions that relate to the investment portfolio for Zeus Corp., a publicly traded corporation. The portfolio is made up of debt and equity instruments all purchased in the current year and accounted for as investments for trading(FVNI). The investee’s year-end is
On January 1, 2020, Verex Co. purchased 10% of Optimal Instrument’s 140,000 shares for $135,000 plus $1,750 in brokerage fees. Management accounted for this investment as a FVOCI. In October, Optimal declared a $1.10 cash dividend. On December 31, which is Verex’s year-end, the market value of
At December 31, 2020, the following information is reported for Jackson Enterprises Co.:Required: Calculate the Other Comprehensive Income (OCI) and total comprehensive income for the year ending December 31, 2020, and the December 31, 2020 ending balance for the Accumulated Other Comprehensive
On January 2, 2020, Bellevue Holdings Ltd. purchased 5%, 10-year bonds with a face value of $200,000 at par. This investment is accounted for at amortized cost. On January 4, 2021, the investee company was experiencing financial difficulties. As a result, Bellevue evaluated the investment and
On December 31, 2020, Camille Co. provided the following information as at December 31, 2020 about its investment accounts that it acquired for trading purposes:During 2021, Warbler Corp. shares were sold for $23,000 and 50% of the Shickter shares were sold for $42,000. At the end of 2021, the fair
On September 30, 2019, FacePlant Inc. purchased a $225,000 face-value bond for par plus accrued interest. The bond pays interest each October 31 at 4%. Management’s investment business model is to hold for trading purposes. On December 31, 2019, the company year-end, the fair value published for
Bremblay Ltd. owns corporate bonds that it accounts for using the amortized cost model.As at December 31, 2020, after an impairment review was triggered, the bonds have the following financial data:The company does not use a valuation account.Required:a. Prepare all relevant entries related to the
On January 1, 2020, Helsinky Co. paid cash to acquire 8% bonds of Britanica Corp. with a maturity value of $250,000, to mature January 1, 2028. The bonds provide a 9% yield and pay interest each December 31. Helsinky purchased these bonds as part of its trading portfolio and accounts for the bonds
On January 1, 2014, Billings Ltd. purchased 2,500 shares of Outlander Holdings for$87,500. During the time that this investment has been held by Billings, the economy and the investee company Outlander have experienced many good and bad times. In 2020, Outlander stated that it was experiencing a
On January 1, 2020, Sandar Ltd. purchased 32% of Yarder Co.’s 50,000 outstanding common shares at a price of $25 per share. This price is based on Yarder’s net assets.On June 30, Yarder declared and paid a cash dividend of $60,000. On December 31, 2020, Yarder reported net income of $120,000
The following T-account shows various transactions using the equity method. This investment of $290,000 is made up of 30% of the outstanding shares of another company who had a carrying amount of $900,000. The excess of the purchase price over the investment amount is attributable to capital assets
On January 1, 2019, Dologan Enterprises Ltd. purchased 30% of the common shares of Twitterbug Inc. for $380,000. These shares are not traded in any active markets. The carrying value of Twitterbug’s net assets at the time of the shares purchase was $1.2 million. Any excess of the purchase cost
On January 1, 2020, Chacha Holdings Ltd., a privately-held corporation that follows ASPE, purchased 35% of the common shares of Eugene Corp. for $600,000. With this purchase, Chacha now has significant influence over Eugene, who is a supplier of materials for Chacha’s production processes. Below
Below are details for several independent investments:i. Preferred shares were purchased from a publicly traded company because of their favourable dividend payout history. They are for sale, but management has no specific intention to sell at this time.ii. On February 1, 2020, 10% or 1,400 shares
On January 1, 2020, Amev Ltd., an IFRS company, acquires a 3%, 5-year, bond at par for$1,150,000, which it intends to hold and collect the contractual cash flows of principal and interest. At year-end, management has determined that there is no significant increase in credit risk, but there is a 1%
Referring to the data in Exercise 8–21, assume now that management estimates that there has been a significant increase in the credit risk and there is now a 6% chance that the Amev will not collect 50% of the bond face value over its life.Required: Prepare the year-end entry and determine the
Referring to the data in Exercise 8–21, prepare the year-end entry assuming that Amev classifies the investment as FVOCI and the fair value of the bond at year-end was 99.5, assuming the probabilities have not changed and there has been no significant change in credit risk.
Describe the statement of income, the statement of comprehensive income, and the statement of changes in equity and their roles in accounting and business.
Identify the factors that influence what is reported in the statement of income, statement of comprehensive income, and the statement of changes in equity.LO 2.1: Explain the factors that influence the choice of accounting year-end.LO 2.2: Explain how changes in accounting estimates, changes due to
Identify the core financial statements and explain how they interconnect together.LO 3.1: Explain the differences between IFRS and ASPE regarding the income and equity statements.
Describe the various formats used for the statement of income and the statement of comprehensive income, and identify the various reporting requirements for companies following IFRS and ASPE.
Describe the various formats used to report the changes in equity for IFRS and ASPE companies, and identify the reporting requirements.
Identify and describe the techniques used to analyze income and equity statements.
The following information pertains to Inglewood Ltd. for the 2020 fiscal year ending December 31:The company tax rate is 27%. The unrealized holding gain is from FVOCI investments where the gain has been recorded to other comprehensive income (OCI).Required:a. Calculate income from continuing
Wozzie Wiggits Ltd. produces and sells gaming software. In 2020, Wozzie’s net income exceeded analysts’ expectations in the stock markets by 8%, suggesting an 8% increase from operations. Included in net income was a significant gain on sale of some unused assets. The company also changed their
Eastern Cycles Ltd. is a franchise that sells bicycles and cycling equipment to the public. It currently operates several corporate-owned retail stores in Ottawa that are not considered a separate major line of business. It also has several franchised stores in Alberta. The franchisees buy all of
For the year ended December 31, 2020, Bunsheim Ltd. reported the following: sales revenue $680,000; cost of sales $425,750; operating expenses $75,000; and unrealized gain on Available-for-sale investments $25,000 (net of related tax of $5,000). The company had balances as at January 1, 2020, as
For the year ended December 31, 2020, Patsy Inc. had income from continuing operations of $1,500,000. During 2020, it disposed of its Calgary division at a loss before taxes of$125,000. Before the disposal, the division operated at a before-tax loss of $150,000 in 2019 and $175,000 in 2020. Patsy
Below are the changes in account balances, except for retained earnings, for Desert Dorm Ltd., for the 2020 fiscal year:Required: Calculate the net income for 2020, assuming there were no entries in the retained earnings account except for net income and a dividend declaration of $44,000, which was
In 2020, Imogen Co. reported net income of $575,000, and declared and paid preferred share dividends of $75,000. During 2020, the company had a weighted average of 66,000 common shares outstanding.Required: Calculate the company’s basic earnings per share.
A list of selected accounts for Opi Co. is shown below. All accounts have normal balances.The income tax rate is 30%.Required:a. Prepare a single-step income statement with expenses by function and a separate statement of retained earnings assuming that Opi is a private company that follows ASPE.b.
Below are adjusted accounts and balances for Ace Retailing Ltd. for the year ended December 31, 2020:Additional information:1. Ace decided to discontinue the J division operations. A formal plan to dispose of J division has been completed. There are no plans to dispose of F division at this time.2.
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