Assume the same information as in E11-20, except that at December 31, 2014, Gaurav discontinues use of the equipment and intends to dispose of it in the coming year by selling it to a competitor. It is expected that the costs of disposal will total $50,000. In exercise E11-20 The information that follows relates to equipment owned by Gaurav Limited at December 31, 2014: Cost $9,000,000 Accumulated depreciation to date 1,000,000 Expected future net cash flows (undiscounted) 7,000,000 Expected future net cash flows (discounted, value in use) 6,350,000 Fair value 6,200,000 Costs to sell (costs of disposal) 50,000 Assume that Gaurav will continue to use this asset in the future. As at December 3I, 20I4, the equipment has a remaining useful life of four years. Gaurav uses the straight-line method of depreciation. Instructions (a) Assume that Gaurav is a private company that follows ASPE. 1. Prepare the journal entry at December 31, 2014, to record asset impairment, if any. 2. Prepare the journal entry to record depreciation expense for 2015. 3. Assume that the asset was not sold by December 31, 2015. The equipment's fair value (and recoverable amount) on this date is $6.5 million. Prepare the journal entry, if any, to record the increase in fair value. It is expected that the costs of disposal will total $50,000. 4. Identify where, and at what amount, the asset will be reported on the December 31, 2015 statement of financial position. (b) Repeat the requirements in (a) above assuming that Gaurav is a public company that follows IFRS, and that the asset meets all criteria for classification as an asset held for sale.
> On September 1, Louisa Ltd. purchased $80,000 of five-year, 9% bonds for $74,086, resulting in an effective (yield) rate of 11%. The bonds pay interest each March I and September I. Louisa Ltd. applies ASPE, accounts for the investment under the amortize
> Consider the following independent situations for Kwok Corporation. Kwok applies ASPE. Situation 1: Kwok purchased equipment in 2007 for $120,000 and estimated a $12,000 residual value at the end of the equipment's 10-year useful life. At December 31, 20
> Jupiter Wells Corp. purchased machinery for $315,000 on May 1, 2013. It is estimated that it will have a useful life of 10 years, residual value of $15,000, production of 240,000 units, and 25,000 working hours. During 2014, Jupiter Wells Corp. used the
> Use the information for Odyssey Ltd. in BE11-5. In exercise Odyssey Ltd. purchased machinery on January 1, 2014, for $60,000. The machinery is estimated to have a residual value of $6,000 after a useful life of eight years. (a) Calculate the 2014 depr
> Odyssey Ltd. purchased machinery on January 1, 2014, for $60,000. The machinery is estimated to have a residual value of $6,000 after a useful life of eight years. (a) Calculate the 2014 depreciation expense using the straight-line method. (b) Calculat
> Gilles Corp. purchased a piece of equipment on February 1, 2014, for $100,000. The equipment has an estimated useful life of eight years with a residual value of $25,000, and an estimated physical life of 10 years with no salvage value. The equipment was
> Chong Corp. purchased a machine on July 1, 2014, for $30,000. Chong paid $200 in title fees and a legal fee of $100 related to the machine. In addition, Chong paid $500 of shipping charges for delivery, and paid $400 to a local contractor to build and wi
> Fran Song looked at the consolidated financial statements of Vixen Manufacturing Limited and shook her head. "I was asked to look at the accounting for Vixen's investments," she said, "but I can't find any investments listed on the balance sheet!" Fran h
> On October 1, 2014, Ocean Airways Ltd. purchased a new commercial aircraft for a total cost of $100 million. Included in the total cost are the aircraft's two engines, at a cost of510 million each, and the aircraft's body, which cost $80 million. The est
> Cella Corporation's statement of financial position shows property, plant, and equipment of $100,000. The notes to its financial statements state that the amount is represented by a cost of $600,000, accumulated depreciation of $300,000, and accumulated
> Fang Limited purchased an asset at a cost of $45,000 on March 1, 2014. The asset has a useful life of seven years and an estimated residual value of $3,000. For tax purposes, the asset belongs in CCA Class 8, with a rate of 20%. Calculate the CCA for eac
> In its 2014 annual report, Winkler Limited reports beginning-of-the-year total assets of $1,923 million, end of- the-year total assets of $2,487 million, total revenue of $2,687 million, and net income of $52 million. (a) Calculate Winkler's asset turno
> Use the information presented for Volumetrics Corporation in BEII-17, but assume that the machinery is sold for $5,200 instead of $13,500. Prepare journal entries to In exercise Volumetrics Corporation owns machinery that cost $20,000 when purchased on
> Jamoka Corporation is a public company that manufactures farm implements such as tractors, combines, and wagons. Jamoka uses the revaluation model per IAS 16, and records asset revaluations using the elimination method. (This means the balance in the acc
> Beta Corp. invested in a three-year, $ 100 face value 8% bond, paying $95.03. At this price, the bond will yield a 10% return. Interest is payable annually. (a) Prepare a bond discount amortization table for Beta Corp. assuming Beta uses the effective in
> Volumetrics Corporation owns machinery that cost $20,000 when purchased on January 1, 2013. Depreciation has been recorded at a rate of $3,000 per year, resulting in a balance in accumulated depreciation of $6,000 at December 31, 2014. The machinery is s
> Caley Inc. owns a building with a carrying amount of $1.5 million, as of January 1, 2014. On that date, Caley's management determined that the buildings location is no longer suitable for the company's operations and decided to dispose of the building by
> Riverbed Ltd. is a manufacturer of computer network equipment and has just recently adopted IFRS. The wireless division is a cash-generating unit or asset group that has the following carrying amounts for its net assets: land, $20,000; buildings, $30,000
> Consider the following types of investments and explain whether they are debt or equity instruments. Provide one or two reasons for each as to why a company might choose this investment. (a) 10,000 Class A voting shares in One Corp. with a market value o
> Greentree Properties Ltd. is a publicly listed company following IFRS. Assume that on December 31, 2014, the carrying amount of land on the statement of financial position is $500,000. Management determines that the land's value in use is $425,000 and th
> Hambrecht Corp. is preparing its financial statements for the fiscal year ending November 30, 2014. Certain specialized equipment was scrapped on January 1, 2015. At November 30, 2014, this equipment was being used in production by Han1brecht and had a c
> Use the information for Qilin Corp. given in BE11-11. By the end of the following year, the machinery's fair value has increased to $490,000. In exercise Qilin Corp., a small company that follows ASPE, owns machinery that cost $900,000 and has accumulat
> Qilin Corp., a small company that follows ASPE, owns machinery that cost $900,000 and has accumulated depreciation of$360,000. The undiscounted future net cash flows from the use of the asset are expected to be $500,000. The equipment's fair value is $40
> Chuckwalla Limited purchased a computer for $7,000 on January 1, 2014. Straight-line depreciation is used for the computer, based on a five-year life and a $1,000 residual value. In 2016, the estimates are revised. Chuckwalla now expects the computer wil
> Extract Corporation, a publicly traded mining company, acquires a mine at a cost of $500,000. Capitalized development costs total $125,000. After the mine is depleted, $75,000 will be spent to restore the property, after which it can be sold for $ 157,50
> Onkar Corporation bought a machine on June 1, 2010, for $31,800, f.o.b. the place of manufacture. Freight costs were $300, and $500 was spent to install it. The machine's useful life was estimated at 10 years, with a residual value of $1,900. On June 1,
> Jared Industries Ltd. presents you with the following information: Instructions Complete the table for the year ended December 31, 2015. The company depreciates all assets for a half year in the year of acquisition and the year of disposal. Accumula
> The following is net asset information for the Dhillon Division of Klaus, Inc.: The purpose of the Dhillon Division (also identified as a reporting unit or cash-generating unit) is to develop a nuclear-powered aircraft. If successful, travelling delays t
> On July 1, 2014, Zoe Corporation purchased the net assets of Soorya Company 10) by paying $415,000 cash and issuing a $50,000 note payable to Soorya Company. At July 1, 2014, the statement of financial position of Soorya Company was as follows: Cash …………
> Fred Moss, owner of Medici Interiors Inc., is negotiating for the purchase of Athenian Galleries Ltd. The condensed statement of financial position of Athenian follows in an abbreviated form: Medici and Athenian agree that the land is undervalued by $40,
> The following information is for a copyright owned by Venetian Corp., a private entity, at December 31, 2014. Venetian Corp. applies ASPE. Cost $4,300,000 Carrying amount 2,150,000 Expected future net cash flows (undiscounted) 2,000
> Repeat E12-13, but now assume that the licence was granted in perpetuity and has an indefinite life, and that Dayton prepares financial statements in accordance with ASPE. In exercise E12-13 At the end of 2014, Dayton Corporation owns a licence with a r
> Repeat E12-13, but now assume that the licence was granted in perpetuity and has an indefinite life. In exercise E12-13: At the end of 2014, Dayton Corporation owns a licence with a remaining life of 10 years and a carrying amount of $530,000. Dayton ex
> Repeat E12-13, but now assume that Dayton prepares financial statements in accordance with ASPE, and that the recoverable amount under ASPE (undiscounted future cash flows) is calculated to be $500,000 at the end of 2015. In exercise E12-13: At the end
> At the end of 2014, Dayton Corporation owns a licence with a remaining life of 10 years and a carrying amount of $530,000. Dayton expects undiscounted future cash flows from this licence to total $535,000. The licence's fair value is $425,000 and disposa
> Safe Ride Incorporated applied for several taxi licenses for its taxicab operations in the City of Waterford and, on August 31, 2014, incurred costs of$14,200 in the application process. The outcome of applying for taxi licenses in the City of Waterford
> PrideTalk Corp., reporting under ASPE, has provided the following information regarding its intangible assets: 1. A patent was purchased from Marvin Inc. for $1.2 million on January 1, 2013. PrideTalk estimated the patent's remaining useful life to be 1
> Andeo Corporation purchased a truck at the beginning of 2014 for $48,000. The truck is estimated to have a residual value of $3,000 and a useful life of 275,000 km. It was driven for $2,000 km in 2014 and 65,000 km in 2015. Calculate depreciation expense
> Marmon Drilling Limited leases property on which oil has been discovered. Wells on this property produced 21,000 barrels of oil during the current year and it was sold at an average of $85 per barrel. The total oil resources of this property are estimate
> Using the information presented in BE9-12, assume instead that Hayes follows a policy of accounting for its investment in Kenyon shares at FV-OCI without recycling. Prepare all entries associated with the disposal of the investment on April 13, 2015 In e
> In 2014, Inventors Corp. spent $392,000 on a research project, hut by the end of 2014 it was impossible to determine whether any benefit would come from it. Inventors prepares financial statements in accordance with IFRS. Instructions (a) What account sh
> Parastu Corp. incurred the following costs during 2014 in connection with its research and development phase activities: Cost of equipment acquired for use in research and development projects over the next five years (straight-line depreciation used) …
> In early January 2014, Kara Corporation applied for and received approval for a trade name, incurring legal costs of $45,000. In January 2 015, Kara incurred $24,300 of legal fees in a successful defense of its trade name. Instructions (a) Management det
> Bountiful Industries Ltd. had one patent recorded on its books as at January 1, 2014. This patent had a book value of $365,000 and a remaining useful life of eight years. During 2014, Bountiful incurred research costs of $140,000 and brought a patent inf
> Sunny Valley Inc. purchased an Internet domain name by issuing a $220,000, five-year, non-interest-bearing note to Ti-Mine Corp. with an effective yield of 12%. The note is repayable in five annual payments of $44,000 each. Prepare the journal entry to r
> Azure Industries Ltd. acquired two copyrights during 2014. One copyright was on a textbook that was developed internally at a cost of $ 18,000. This textbook is estimated to have a useful life of three years from September 1, 2014, the date it was publis
> Brilliant Minds Inc. incurred the following costs associated with its research facilities. Indicate whether these items are capitalized or expensed in the current year: (a) Executive salaries (b) Costs of testing prototypes (c) Market research to prepare
> For each independent scenario outlined below, discuss whether the three criteria required for an asset to be classified as an intangible are fulfilled: (a) Software purchased specifically for a manufacturing machine that cannot operate without that softw
> Eastwind Corporation purchased 400 common shares of Ditch Inc. for $13,200 on February 21. Eastwind paid a 1% commission on the share purchase and, because the shares were not publicly traded, decided to account for them using the costlan10rtized cost me
> Discuss the three objectives of disclosure of financial instruments under ASPE and IFRS. In your discussion explain how specific disclosure requirements meet these objectives.
> Write a short essay describing the incurred loss model and the expected loss model of impairment. Summarize each model and compare the two models, indicating the potential benefits and drawbacks of each. Which model do you think provides the more transpa
> Jax Taylor has the financial statements of an old established university, a manufacturing company, an insurance company, a real estate developer, a major retail enterprise, and a pension plan. (a) Identify the organizations whose statements of financial
> Write a brief essay highlighting the differences between IFRS and ASPE noted in this chapter, discussing the conceptual justification for each.
> The International Accounting Standards Board (IASB) is proposing the use of the expected loss model to determine impairment losses for financial assets measured using the cost or amortized cost basis. Currently, the incurred Joss model is used under IFRS
> On July 1, 2014, Munns Corp. purchased for cash 25% of the outstanding shares of Huber Corporation. Both Munns and Huber have a December 31 year end. Huber Corporation, whose common shares are actively traded on the Toronto Stock Exchange, paid a cash di
> It is July 31, 2013, and you have just started working for Andrelli Corp. as part of the controller's group involved in current financial reporting problems. Kameela Franklin, controller for Andrelli, is interested in your accounting background because t
> EMI Inc. is a public company that operates numerous movie theatres in Canada. Historically, it operated as a trust and its business model consisted of distributing all of its earnings to shareholders through dividends. As a result of tax changes two year
> Impaired Investments Limited (IIL) is in the real estate industry. Last year, the company divested itself of some major investments in real estate and invested the funds in several instruments as follows: 1. Investments in 5% bonds: currently carried at
> Cando Communications (CC) is a public company that owns and operates 10 broadcast television stations and several specialty cable channels, 10 newspapers (including me International Post), and many other non-daily publications. It has a 57.6% economic in
> The information that follows relates to equipment owned by Gaurav Limited at December 31, 2014: Cost $9,000,000 Accumulated depreciation to date 1,000,000 Expected future net cash flows (undiscounted) 7,000,000 Expected future net
> Investment Company Limited (ICL) is a private company owned by 10 doctors. The company's objective is to manage the doctors' investment portfolios. It actually began as an invesm1ent club 10 years ago. At that time, each doctor invested equal amounts of
> The following amortization schedule is for Flagg Ltd.'s investment in Spangler Corps $100,000, five-year bonds with a 7% interest rate and a 5% yield, which were purchased on December 31, 2013, for $108,660: The following schedule presents a comparison o
> The following information relates to the 2014 debt and equity invesm1ent transactions of Wildcat Ltd., a publicly accountable Canadian corporation. All of the investments were acquired for trading purposes and accounted for using the fair value through n
> Bali Corp. has $10,000 surplus funds to invest and is considering investing in either Company A or Company B. Company A promises to return the $10,000 original amount invested in three years' time and pay a 2% annual return on the principal amount. Compa
> MacAskill Corp. has the following portfolio of securities acquired for trading purposes and accounted for using the fair value through net income model at September 30, 2014, the end of the company~ third quarter: On October 8, 2014, the Yuen shares were
> On December 31, 2013, Acker Ltd. reported the following statement of financial position. The accumulated other comprehensive income was related only to the company~ non-traded equity investments. The fair value of Acker Ltd.'s investments at December 31,
> On January 1, 2 014, Melbourne Corporation, a public company, acquired 15,000 of the 50,000 outstanding common shares of Noah Corp. for $25 per share. The statement of financial position of Noah reported the following information at the date of the acqui
> Fellows Inc., a publicly traded manufacturing company in the technology industry, has a November 30 fiscal year end. The company grew rapidly during its first 10 years and made three public offerings during this period. During its rapid growth period, Fe
> Harper Corporation has the following portfolio of investments at December 31, 2014, that qualify and are accounted for using the fair value through other comprehensive income (FV-OIC) method: Early in 2015, Harper sold all the Frank Inc. shares for $17 p
> Green Thumb Landscaping Limited has determined that its lawn maintenance division is a cash-generating unit under IFRS. The carrying an10unts of the division’s assets at December 31, 2014, are as follows: Land $25,000 Building 50,000 E
> Octavia Corp. prepares financial statements annually on December 31, its fiscal year end. At December 31, 2014, the company has the account Investments in its general ledger that contains the following debits for investment purchases, and no credits: The
> On December 31, 2013, Nodd Corp. acquired an investment in GT Ltd. bonds with a nominal interest rate of I 0% (received each December 31) and the controller produced the following bond amortization schedule based on an effective rate of approximately 15%
> Castlegar Ltd. had the following investment portfolio at January 1, 2014: During 2014, the following transactions took place: 1. On March 1, Josie Corp. paid a $2 per share dividend. 2. On April 30, Castlegar sold 300 shares of Asher Corp. for $10 per sh
> Pascale Corp. has the following securities (all purchased in 2014) in its investment ponfolio on December 31, 2014: (1) 2,500 Anderson Corp. common shares, which cost $48,750 (2) 10,000 Munter Ltd. common shares, which cost $580,000 (3) 6,000 King Corp.
> Access the annual report for British Airways pic for the year ended December 31, 2011, from the company's website. Use the notes to the financial statements to answer the following questions. Instructions (a) Does British Airways pic report any intangib
> NB Corp. purchased a $100,000 face-value bond of Myers Corp. on August 31, 2013, for $104,490 plus accrued interest. The bond pays interest annually each November 1 at a rate of 9%. On November 1, 2013, NB Corp. received the annual interest. On December
> On December 31, 2013, Zurich Corp. provided you with the following pre-adjustment information regarding its portfolio of investments held for short-term profit-taking: During 2014, Bilby Corp. shares were sold for 59,500. The fair values of the securitie
> In early January 2014, Chi Inc., a private enterprise that applies ASPE, purchased 40% of the common shares of Washi Corp. for $410,000. Chi was now able to exercise considerable influence in decisions made by Washi's management. Washi Corp.’s statement
> Refer to the information in E9-3, except assume that Mustafa hopes to make a gain on the bonds as interest rates are expected to fall. Mustafa accounts for the bonds at fair value with changes in value taken to net income, and separately recognizes and r
> On January 1, 2014, Phantom Corp. acquires $300,000 of Spider Products, Inc. 9% bonds at a price of 5278,384. The interest is payable each December 31, and the bonds mature on December 31, 2016. The investment will provide Phantom Corp. with a 12% yield.
> Perez Corp., a mining company, owns a significant mineral deposit in a northern territory. Included in the asset is a road system that was constructed to give company personnel access to the mineral deposit for maintenance and mining activity. The road s
> On January 1, 2014, Mustafa Limited paid $537,907.40 for 12% bonds with a maturity value of $500,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2014, and mature on January 1, 2019, with interest receivable on December
> On January 1, 2014, Kenn Corp. purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2014, and mature on January 1, 2019, with interest receivable on December 31 of each year. The bonds are accounted for using the amor
> Each of the following investments is independent of the others. 1. A bond that will mature in four years was bought one month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold. 2. Ten percent of the
> The following are two independent situations. Situation 1: Lauren Inc. received dividends from its common share investments during the year ended December 31, 2014, as follows: • A cash dividend of $12,250 is received from Peel Corporation. Lauren owns a
> On January 1, 2014, Rae Corporation purchased 30% of the common shares of Martz Limited for $196,000. Martz Limited shares are not traded in an active market. The carrying amount of Martz's net assets was $520,000 on that date. Any excess of the purchase
> Instructions Read the article "Recognizing Assets" by John Browne, CA Magazine, December 2008. Answer the following questions. (a) What are regulatory assets? Which types of companies have these assets? (b) What are the current accounting issues with res
> Harnish Inc. acquired 25% of the outstanding common shares of Gregson Inc. on December 31, 2013. The purchase price was $1,250,000 for 62,500 shares, and is equal to 25% of Gregson's carrying amount. Gregson declared and paid a $0.75 per share cash divid
> Fox Ltd. invested 51 million in Gloven Corp. early in the current year, receiving 25% of its outstanding shares. At the time of the purchase, Gloven Corp. had a carrying amount of $3.2 million. Gloven Corp. pays out 35% of its net income in dividends eac
> Holmes, Inc. purchased 30% of Nadal Corporation's 30,000 outstanding common shares at a cost of515 per share on January 3, 2014. The purchase price of515 per share was based solely on the book value of Nadal's net assets. On September 21, Nadal declared
> Weekly Corp., a December 31 year-end company that applies IFRS, acquired an investment in 1,000 shares of Credence Corp. in mid-2010 for $29,850. Between significant volatility in the markets and in the business prospects of Credence Corp., the accountin
> The management of Luis Inc., a small private company that uses the cost recovery impairment model, was discussing whether certain equipment should be written down as a charge to current operations because of obsolescence. The assets had a cost of $900,00
> On January 1, 2012, Mamood Ltd. paid $322,744.44 for 12% bonds of Variation Ltd. with a maturity value of$300,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2012, mature on January 1, 2018, and pay interest each Decemb
> In early 2014, for the first time, HTSM Corp. invested in the common shares of another Canadian company. It acquired 5,000 shares of Toronto Stock Exchange-traded Bayscape Ltd. at a cost of $68,750. Bayscape is projected to reach a value of $ 15.50 per s
> Niger Corp. provided you with the following information about its investment in Fahad Corp. shares purchased in May 2014 and accounted for using the FV-OCI method: Cost………………………………………………………………………………. $39,900 Fair value, December 31, 2014………………………………………….
> At December 31, 2014, the equity investments of Wang Inc. that were accounted for using the fair value through other comprehensive income model without recycling (application of IFRS 9) were as follows: Because of a change in relationship with Ahn Inc.,
> Arantxa Corporation made the following purchases of investments during 2014, the first year in which Arantxa invested in equity securities: 1. On January 15, purchased 9,000 shares of Nirmala Corp.'s common shares at $33.50 per share plus commission of $
> The following information is available about Kao Corp.'s investments at December 31, 2014. This is the first year Kao has purchased securities for investment purposes. Assume that Kao Corp. follows IFRS and applies IAS 39. Instructions (a) Prepare the
> L'Oreal is the world's largest cosmetic company, with brands such as its own name, Redken, Mayhelline, Lancome, and Ralph Lauren, just to name a few. Instructions Access L'Oreal’s annual financial statements for the year ended December 31, 2011, from
> Activet Corporation, a Canadian-based international company that follows IFRS, including IAS 39, has the following securities in its portfolio of investments acquired for trading purposes and accounted for using the fair value through net income method o
