Club Loop Corporation (CL) is a large owner, operator, and developer of golf clubs and resorts. The company is privately owned by several wealthy individuals. During the current year, according to the draft financial statements, revenues increased by 7.2% and net operating income increased by 13% to $22.5 million. Net income dropped from $2.9 million to $822,000. The decrease was largely due to two events: a change in accounting policy and costs related to the settlement of a lawsuit. One of the company’s objectives is to always ensure that capital resources are readily available to meet approved capital expenditures and to take advantage of growth opportunities. According to the draft year-end financial statements, the company has current assets of $12 million and current liabilities of $28 million, resulting in a working capital deficit. Included in the current liabilities are long-term debts that are currently due. The company is working with the financial institutions in question to renew or replace these facilities. CL has received unsolicited expressions of interest from several financial institutions concerning these facilities, and management believes that these facilities will be replaced- hopefully before the current financial statements are issued. The company owns most of the land on which CLJs golf courses are developed. Currently, the company follows a rigorous "weed and feed" program in order to keep the grass on the golf courses in top shape. The chemicals in these fertilizers, herbicides, and insecticides are felt by some people in the local community to be toxic to the environment. The company has met with several community groups and has agreed to study the issue further. In a current meeting of the board of directors, the CEO committed the company to spending $1 million to limit any potential damage. As at year end, none of this amount has yet been spent. There is a concern that the community groups are going to launch legal proceedings and the company feels that this move will help CI.Js position if there ends up being a lawsuit. Part of the money is for landscaping to limit the spread of the sprayed chemicals and part of it is for advertising to promote the company as a good corporate citizen. The company is currently developing new golf courses. All direct costs related to the acquisition, development, and construction of these properties, including interest and management costs, are capitalized. For one of the new locations, which was just purchased and developed in the current year, the company has run into a small problem. After CL spent several million dollars on development, the planned golf course is being blocked by environmental groups. The costs to develop the land have been capitalized as previously mentioned, on the basis that they would be recoverable from future membership revenues. However, the company has now decided to sell the land to a real estate developer. CL.Js stock-based compensation plan consists of stock options. The company does not recognize any expense for this plan when stock options are issued to employees. It has been company policy to repurchase any shares issued under these stock option plans, although this year the company has indicated that it might not do this since it is planning to redesign the stock-based compensation system. On July I, the government tax department issued notices of assessment to the company regarding a dispute over the recognition of revenues. Although the outcome of an appeal of the assessment cannot be determined, the company believes that it will owe S8.7 million if its appeal is unsuccessful. Instructions Adopt the role of the company's auditor and prepare an analysis of the financial reporting issues.
> Find the present values of these ordinary annuities. Discounting occurs once a year. a. $400 per year for 10 years at 10% b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Rework Parts a, b, and c assuming they are annuities due.
> Find the future values of these ordinary annuities. Compounding occurs once a year. a. $400 per year for 10 years at 10% b. $200 per year for 5 years at 5% c. $400 per year for 5 years at 0% d. Rework Parts a, b, and c assuming they are annuities due.
> How long will it take $200 to double if it earns the following rates? Compounding occurs once a year. a. 7% b. 10% c. 18% d. 100%
> Find the interest rates earned on each of the following: a. You borrow $700 and promise to pay back $749 at the end of 1 year. b. You lend $700 and the borrower promises to pay you $749 at the end of 1 year. c. You borrow $85,000 and promise to pay back
> Shalit Corporation’s 2008 sales were $12 million. Its 2003 sales were $6 million. a. At what rate have sales been growing? b. Suppose someone made this statement: “Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by
> Find the following values. Compounding/discounting occurs annually. a. An initial $500 compounded for 10 years at 6% b. An initial $500 compounded for 10 years at 12% c. The present value of $500 due in 10 years at 6% d. The present value of $1,552.90 du
> Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually. a. An initial $500 compounded for 1 year at 6% b. An initial $500 compounded for 2 years at 6% c. The present value of $500 due in 1 y
> You want to buy a car, and a local bank will lend you $20,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 12% with interest paid monthly. What will be the monthly loan payment? What will be the loan’s
> What is an opportunity cost? How is this concept used in TVM analysis, and where is it shown on a time line? Is a single number used in all situations? Explain.
> What are some actions that stockholders can take to ensure that management’s and stockholders’ interests are aligned?
> If you bought a share of stock, what would you expect to receive, when would you expect to receive it, and would you be certain that your expectations would be met?
> Use the information for Odyssey Ltd. in BE11-5. In exercise BE11-5 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 20
> On December 31, 2014, Convenient Cabs Incorporated was granted 10 taxi licences by the City of Somerdale, at a cost of $1,000 per licence. It is probable that Convenient Cabs will receive the expected future economic benefits of the taxi licences. There
> Use the information in BE12-13 and assume that in January 2016, Latupatula spends $26,000 successfully defending a patent suit. In addition, Latupatula now feels the patent will be useful only for another seven years. Prepare the journal entries to recor
> Wettlauffer Company Ltd. shows the following entries in its Equipment account for 2014. All amounts are based on historical cost. Instructions (a) Prepare any correcting entries that are necessary (b) Assuming that depreciation is to be charged for a fu
> Latupatula Corporation purchased a patent from MaFee Corp. on January 1, 2014, for $87,000. The patent had a remaining legal life of 16 years. Prepare Latupatula's journal entries to record the 2014 patent purchase and amortization.
> Green Earth Corp. has capitalized software costs of $980,000 on a product to be sold externally. During its first year, sales of this product totalled $380,000. Green Earth expects to earn $1,560,000 in additional future revenue from this product, which
> Alaska Corporation purchased 300 common shares of Burke Inc. for $23,400 and accounted for them using the fair value through other comprehensive income model. During the year, Burke paid a cash dividend of $3.25 per share. At year end, Burke shares had a
> Darrien Corporation purchased a trade name, customer list, and manufacturing equipment for a Jump sum of $800,000. The fair market values of each asset are $280,000, $290,000, and $320,000, respectively. There were initial operating losses of $14,500 dur
> Wholesome Foods Corporation is a producer of gourmet organic cookies. The company was established three years ago when its founder and president, Martha Spencer, purchased the trademark "Healthy Originals" and its six patented cookie recipes. Martha soon
> Rachel Timber Inc., a small private company that follows Canadian ASPE, owns 9,000 hectares of timberland purchased in 2001 at a cost of $1,400 per hectare. At the time of purchase, the land without the timber was valued at $420 per hectare. In 2002, Rac
> Nigel Corporation is interested in purchasing Lau Company Ltd. The total of Lau’s net income amounts over the last five years is $750,000. During one of those years, Lau reported a gain on discontinued operations of $94,000. The fair value of Lau's net i
> Early in its 2014 fiscal year (December 31 year-end), Hayes Company purchased 10,000 shares of Kenyon Corporation common shares for $26.18 per share, plus $1,800 in brokerage commissions. These securities were accounted for at FV-OCI (with recycling) and
> Using the data from BE12-19, assume that Luigi Corporation is a private entity. Explain how goodwill will 10) be tested for impairment. If the unit's carrying amount (including goodwill) is $3,613,000 and its fair value is $3,550,000, determine the amoun
> Using the data from BE12-19, assume that Luigi Corporation is a public company and that the goodwill 10) was allocated entirely to one cash-generating unit (CGU). Two years later, information about the CGU is as follows: carrying amount $3,925,000; value
> On September 1, 2014, Luigi Corporation acquired Edinburgh Enterprises for a cash payment of $863,000. At the time of purchase, Edinburgh's statement of financial position showed assets of $900,000, liabilities of $460,000, and owners' equity of $440,000
> Use the data provided in BE12-16, except assume that useful life is expected to be unlimited. How would your response change if ABC reports under (a) ASPE (b) IFRS In exercise E12-16: ABC Company has a trademark with a carrying amount of $83,750,
> Use the data provided in BE12- 16. How would your response change if ABC is a public company reporting under IFRS? In exercise E12-16: ABC Company has a trademark with a carrying amount of $83,750, and expected useful life of 15 years. As part of an imp
> ABC Company has a trademark with a carrying amount of $83,750, and expected useful life of 15 years. As part of an impairment test on December 31, 2014, due to a change in customer tastes, ABC gathered the following data about the trademark for purposes
> Swinson, Inc., a private company that applies ASPE, incurred $15,000 in materials and $12,000 in direct labour costs between January and March 2014 to develop a new product. In May 2014, the criteria required to capitalize development costs were met. A f
> WEBDESIGN Ltd. decided that it needed to update its computer programs for its supplier relationships. It purchased an off-the-shelf program and modified it internally to link it to 'WEBDESIGN's other programs. The following costs may be relevant to the a
> Canadian Tire Corporation, Limited is one of Canada's best-known retailers. Obtain a copy of Canadian Tire's financial statements for the year ended December 31, 2011, through SEDAR at www.sedar.com or on the companys website. To answer the following que
> Instructions Gain access to the 2011 financial statements of Potash Corporation of Saskatchewan from the company's website (www.potashcorp.com) or www.sedar.com. (a) Based on the information contained in these financial statements, determine each of the
> Usually a comparison assignment involves comparing two similar companies that are reporting under different GAAP. Ideally, it would be better to compare the same company's financial reports prepared on two different bases. First Capital Realty adopted IF
> Lufthansa and Air Canada are both global airline companies. Lufthansa reports under IFRS. Air Canada reported under pre-changeover Canadian GAAP until 2010 and now reports under IFRS. Access the financial statements of Lufthansa for its year ended Decemb
> Two well-known company names in the transportation industry in Canada are Canadian National Railway Company and Canadian Pacific Railway Limited. Go co either SEDAR (www.sedar.com) or to each company's website to gain access to the financial statements o
> Gibbs Inc. purchased a machine on January 1, 2014, at a cost of $60,000. The machine is expected to have an estimated residual value of $5,000 at the end of its five-year useful life. The company capitalized the machine and depreciated it in 2014 using t
> Brookfield Asset Management Inc. is a publicly traded Canadian company that converted to IFRS on January 1, 2010. Instructions From the company's website, access the annual report for the year ended December 31, 2009, the last year of reporting under Ca
> LianTang, HK Corporation's controller, is concerned that net income may be lower this year. He is afraid that upper-level management might recommend cost reductions by layiog off accounting staff, himself included. Tang knows that depreciation is a major
> Prophet Manufacturing Limited was organized on January 1, 2014. During 2014, it used the straight-line method of amortizing its plant assets in its reports to management. As the company's controller, on November 8 you are having a conference with Prophet
> On March 31, Ramesh Corp. invests in a $1,000, 6% bond to be held for short-term trading purposes, and accounts for this investment using the FV-NI method. The bond's fair value when acquired was $970, but an additional $10 was paid (and debited to Inter
> Write a brief essay highlighting the differences between IFRS and ASPE noted in this chapter, discussing the conceptual justification for each.
> How even Inc. is a private company that expects to "go public" and become publicly traded soon. Accordingly, it expects to be adopting IFRS by 2014. It is a manufacturing company with extensive investments in property, plant, and equipment. The company c
> Variable interest entities (VIEs) is a very complex topic and continues to be high on the agendas of the accounting standard-setting communities around the world. Part of the recent global credit crisis, as well as the fall of Enron, was a result of the
> Puma Paper Company Ltd. operates a 300-tonne per-day kraft pulp mill and four sawmills in New Brunswick. The company is expanding its pulp mill facilities to a capacity of 1,000 tonnes per day and plans to replace three of its older, less efficient sawmi
> Realtor Inc. is a company that owns five large office buildings that are leased out to tenants. Most of the leases are for 10 years or more with renewal clauses for an additional 5 years. Currently, the company is a private company that follows ASPE. Rec
> Nickel Strike Mines is a nickel mining company with mines in northern Ontario, Colombia, and Australia. It is a publicly traded company and follows IFRS, and has historically followed industry practice and used units of production as its depreciation pol
> MA Hydro (MH) is a private company that owns and operates all of Ontario~ electricity transmission systems. It is deciding whether it should follow IFRS or ASPE in the upcoming year. The company must choose now and is looking to do an analysis of the imp
> On March 10, 2014, Lucas Limited sold equipment that it purchased for $192,000 on August 20, 2007. It was originally estimated that the equipment would have a useful life of 12 years and a residual value of $16,800 at the end of that time, and depreciati
> On June 15,201 1, a second-hand machine was purchased for$77,000. Before being put into service, the equipment was overhauled at a cost of$5,200, and additional costs of $400 for direct material and $800 for direct labour were paid in fine-tuning the con
> Phoenix Corp. purchased Machine no. 201 on May 1, 2014. The following information relating to Machine no. 201 was gathered at the end of May: Price $85,000 Credit terms 2/10, n/30 Freight-in costs $800 Preparation and i
> Kitchigami Limited was attracted to the Town of Mornington by the town's municipal industry commission. Mornington donated a plant site to Kitchigami, and the provincial government provided S150, 000 toward the cost of the new manufacturing facility. The
> On October 1, Qilan Ltd. purchased 7% bonds with a face value of $1,000 for trading purposes, accounting for the investment at fair value through net income. The bonds were priced at 1.044 to yield Qilan 6%, and pay interest annually each October 1. Qila
> Refer to the 2011 financial statements and accompanying notes of Royal Bank of Canada (RBC) that are found on the company's website ('www.royalbank.ca) or www.sedar.com. Instructions (a) What percentage of total assets is held in investments (2011 versu
> Munro Limited reports the following information in its tax files covering the five-year period from 2012 to 2016. All assets are Class 10 with a 30% maximum CCA, and no capital assets had been acquired before 2012. 2012 Purchased assets A, B, and C for $
> Consider the following independent situations. Situation 1: Ducharme Corporation purchased electrical equipment at a cost of $12,400 on June 2, 2011. From 2011 through 2014, the equipment was depreciated on a straight-line basis, under the assumption tha
> Sung Corporation, a manufacturer of steel products, began operations on October 1, 2013. Sung’s accounting department has begun preparing the capital asset and depreciation schedule that follows. You have been asked to assist in complet
> The following is a schedule of property dispositions for Shangari Corp.: The following additional information is available: Land On February 15, land that was being held mainly as an investment was expropriated by the city. On March 31, another parcel of
> Conan Logging and Lumber Company, a small private company that follows ASPE, owns 3,000 hectares of timberland on the north side of Mount Leno, which was purchased in 2002 at a cost of S550 per hectare. In 2014, Conan began selectively logging this timbe
> Hubbub Company Ltd. acquired equipment at the beginning of Year 1. The asset has an estimated useful life of five years. An employee has prepared depreciation schedules for this asset using two different methods to compare the results of using one method
> Khamsah Mining Ltd. is a small private company that purchased a tract of land for $720,000. After incurring exploration costs of $83,000, the company estimated that the tract will yield 120,000 tonnes of ore having enough mineral content to make mining a
> On April30, 2014, Oceanarium Corporation ordered a new passenger ship, which was delivered to the designated cruise port and available for use as of June 30, 2014. Overall, the cost of the ship was $97 million, with an estimated useful life of 12 years a
> Linda Monkland established Monkland Ltd. in mid-2013 as the sole shareholder. The accounts on June 30, 2014, the company's year end, just prior to preparing the required adjusting entries, were as follows: All the capital assets were acquired and put int
> Soon after December 31,2014, the auditor of Morino Manufacturing Corp. asked the company to prepare a depreciation schedule for semi trucks that showed the additions, retirements, depreciation, and other data that affected the company's income in the fou
> Refer to the annual financial statements of Shoppers Drug Mart for its fiscal year ended December 31, 2011, found in Appendix 5B. Instructions (a) Review Shoppers Drug Mart's balance sheet. Identify all financial investments that are reported. You may n
> On January 1, 2012, Dayan Corporation, a small manufacturer of machine tools, acquired new industrial equipment for $1.1 million. The new equipment had a useful life of five years and the residual value was estimated to be $50,000. Dayan estimates that t
> Abdul Corporation purchased 400 common shares of Sigma Inc. for trading purposes for $13,200 on September 8 and accounted for the investment under ASPE at FV-NI. In December, Sigma declared and paid a cash dividend of $1.75 per share. At year end, Decemb
> Comco Tool Corp. records depreciation annually at the end of the year. Its policy is to take a full year's depreciation on all assets that are used throughout the year and depreciation for half a year on all machines that are acquired or disposed of duri
> Gambit Corporation purchased a new plant asset on April 1, 2014, at a cost of $769,000. It was estimated to have a useful life of 20 years and a residual value of $300,000, and a physical life of 30 years and a salvage value of $0. Gambit's accounting pe
> Diderot Corp. acquired a property on September 15, 2014, for $220,000, paying $3,000 in transfer taxes and a $1,500 real estate fee. Based on the provincial assessment information, 75% of the property's value was related to the building and 25% to the la
> The following assets have been acquired by various companies over the past year: 1. Boardroom table and chairs for a corporate head office 2. Dental equipment in a new dental clinic 3. Long-haul trucks for a trucking business 4. Weight and aerobic equipm
> Jiang Company Ltd. Purchases equipment on January 1, 2014, for $387,000 cash. The asset is expected to have a useful life of 12 years and a residual value of$39,000.Jiang prepares financial statements under IFRS. Instructions (a) Calculate the amount of
> Barnett Inc. purchased computer equipment on March 1, 2014, for $31,000. The computer equipment has a useful life of five years and a residual value of 51,000. Barnett uses a double declining- balance method of depreciation for this type of capital asset
> During 2014, Laiken Limited sold its only Class 3 asset. At the time of sale, the balance of the undepreciated capital cost for this class was $37,450. The asset originally cost $129,500. Instructions (a) Calculate recaptured CCA, capital gains, and ter
> On August 1, 2014, Iroko Corporation purchased a new machine for its assembly process. The cost of this machine was $136,400. The company estimated that the machine will have a trade-in value of $14,200 at the end of its useful life. Its useful life was
> Addison Manufacturing holds a large portfolio of debt securities as an investment. The fair value of the portfolio is greater than its original cost, even though some securities have decreased in value. Ted Abernathy, the financial vice-president, and Do
> The 2014 annual report of Trocchi Inc. contains the following information (in thousands): Instructions (a) Calculate the following ratios for Trocchi Inc. for 2014: 1. Asset turnover ratio 2. Rate of return on assets 3. Profit margin on sales (b) How ca
> On April 1, 2014, Lombardi Corp. was awarded $460,000 cash as compensation for the forced sale of its land and building, which were directly in the path of a new highway. The land and building cost $60,000 and $280,000, respectively, when they were acqui
> On December 31, 2013, Grey Inc. owns a machine with a carrying amount of $940,000. The original cost and accumulated depreciation for the machine on this date are as follows: Machine $1,300,000 Accumulated depreciation 360,000 $94
> 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
