You, CPA, are working as the controller for a video game development company called All Starr Games Inc. (All Starr).
Since there are plans for All Starr to go public, Owen would like you to explain each transaction from both the ASPE and IFRS point of view. He would like you to prepare your analysis using the following approach: • Identify whether the transaction is a financial instrument under each framework.
Summary of transactionsn
Prepared by Owen Starrn
Doyle Games is a local game company that needed some new computers and virtual reality studio equipment. In January, All Starr entered into an agreement with DoyleGames, selling it $80,000 in equipment but agreeing not to collect for three years. DoyleGames is expecting a grant from the government that will be paid in three years’ time. All Starr would normally charge interest of 8%, but has agreed to waive interest for this contract. The $80,000 balance owing from Doyle has been recorded as a note receivable. All Starr recorded a gain on the sale of equipment of $25,000.n
Per our sales contracts, we offer a one-year warranty covering defects in the games.Customers have the option to return the game cartridge for replacement or repair.n
In March, All Starr purchased Pacific Loans and Savings (Pacific) securities, which are listed on the Toronto Stock Exchange. Pacific was selected as a good investment based on its history of dividends and analyst predictions for capital appreciation in the short term. Unfortunately, Pacific has dropped in value since it was acquired due to the slowdown in the housing market and recent government policy changes requiring larger down payments for first-time homebuyers. These investments were acquired with the intention of selling them in the short term if price increased
Note: Assume that the fair market value will not fluctuate from December 15 toDecember 31.