The controller of Frosty frozen Treats (FFT) is preparing the year-end financial statements in exchange and external audit working paper file. The controller is reviewing the following transactions that took place during the year (all figures are in '000)

1). The company agreed to sell a large order of ice cream to a retailer in exchange for $10,000 cash and a note receivable for $50,000 at 3%. The note is repayable at the end of a two-year-period. Interest must be paid at the end of each year. The retailer's normal borrowing rate is prime plus 3%. At the of the sale, prime was 3%. FFT recorded revenue of $60,000.

2). Given the recent volatility in the market, FFT decided to enter into the futures contract to lock in the price of milk on April 1. The contract is traded on the Chicago Mercantile Exchange, under the symbol DC, and is for the standard contract size of 200,000 lbs. The contract was entered into at a price of $21.22 per hundredweight. As at year-end, milk was trading at $19.54 per hundredweight. FFT has not recognized this futures in the accounts.

3). On July 1, the company received a $150,000 patent infringement settlement regarding the competitor's use of FFT's special recipe. The funds are going to be used to reinvest in the business's capital assets and expand operations within the next two years. Because the expansion is not taking place until next year, management decided to invest funds into an exchange traded funds that invests in the mixture of short and long- term bonds. The bond fund was trading at 412.50 per share on July 1, and at $13.38 on December 31. This bond fund is being carried at its historical cost.

Required: 

Assume the role of the controller and prepare a report that discusses the recognition and measurement of the financial instruments noted above. The company uses IFRS.

Answer rating: 100% (QA)

ANSWER The controller of Frosty frozen Treats FFT is making ready the yeargive up economic statements in change and outside audit operating paper file ... View the full answer