Eloisa Corporation applies IFRS. Information about Eloisa Corporation's income before income tax of $633,000 for its year ended December 31, 2020, includes the following: 1. CCA reported on the 2020 tax return exceeded depreciation reported on the income statement by $100,000. This difference, plus the $150,000 accumulated taxable temporary difference at January 1, 2020, is expected to reverse in equal amounts over the four-year period from 2021 to 2024. 2. Dividends received from taxable Canadian corporations were $15,000. 3. Rent collected in advance and included in taxable income as at December 31, 2019, totalled $60,000 for a three-year period. Of this amount, $40,000 was reported as unearned for book purposes at December 31, 2020. Eloisa reports unearned revenue as a current liability if it will be recognized in income within 12 months from the balance sheet date. Eloisa paid a $2,880 interest penalty for late income tax instalments. The interest penalty is not deductible for income tax purposes at any time. 4. Equipment was disposed of during the year for $90,000. The equipment had a cost of $105,000 and accumulated depreciation to the date of disposal of $37,000. The total proceeds on the sale of these assets reduced the CCA class; in other words, no gain or loss is reported for tax purposes. 5. Eloisa recognized a $75,000 loss on impairment of a long-term investment whose value was considered impaired. The Income Tax Act permits the loss to be deducted only when the investment is sold and the loss is actually realized. The investment was accounted for at amortized cost. 6. The tax rates are 30% for 2020 and 25% for 2021 and subsequent years. These rates have been enacted and known for the past two years. Instructions a. Calculate the balance in the Deferred Tax asset or Deferred Tax Liability account at December 31, 2019. b. Calculate the balance in the Deferred Tax asset or Deferred Tax Liability account at December 31, 2020. c. Prepare the journal entries to record income taxes for 2020. d. Indicate how the Deferred Tax asset or Deferred Tax Liability account(s) will be reported on the comparative statements of financial position for 2019 and 2020. e. Prepare the income tax expense section of the income statement for 2020, beginning with “Income before income tax.” f. Calculate the effective rate of tax. Provide a reconciliation and explanation of why this differs from the statutory rate of 30%. Begin the reconciliation with the statutory rate. Round the tax rates to one decimal place. g. How would your response to parts (a) to (f) change if Eloisa reported under ASPE?
> Rosek Inc. provides the following information related to its post-retirement health-care benefits for the year 2020: Rosek Inc. follows IFRS. Instructions a. Calculate the post-retirement benefit expense for 2020. b. Calculate the post-retirement be
> Access the annual financial statements of Empire Company Limited for its year ended May 6, 2017, at www.sedar.com or the company's website. Instructions Review Empire Company Limited's consolidated financial statements and provide answers to the follo
> MFI Holdings Inc. follows IFRS and applies the FV-OCI model with recycling and has adopted the option to show dividends received as operating activities. MFI's SFP contained the following comparative data at December 31: At December 31, 2020, the follow
> Neilson Corp. reported $245,000 of net income for 2020. In preparing the statement of cash flows, the accountant noted several items that might affect cash flows from operating activities. 1. During 2020, Neilson reported a sale of equipment for $7,000.
> Gao Limited, a publicly traded company, uses IFRS and had the following events and transactions occur in its fiscal year ended October 31, 2020. Although no dates are given, the events described are in chronological order. 1. Gao Limited repurchased com
> Ashley Limited, which follows IFRS, chooses to classify interest and dividends received as well as interest paid as operating activities and dividends paid as financing activities. Ashley had the following information available at the end of 2020: Not
> Comparative SFP accounts of Jensen Limited, which follows IFRS, appear below: Data from Jensen's 2020 income statement follow: Additional information: 1. Equipment that cost $10,000 and was 40% depreciated was sold in 2020. 2. Cash dividends were dec
> Laflamme Inc. follows IFRS and has adopted the policy of classifying interest paid as operating activities and dividends paid as financing activities. Comparative SFP accounts of Laflamme Inc., and its statement of income for the year ended December 31,
> The following is Mann Corp.'s comparative SFP at December 31, 2020 and 2019, with a column showing the increase (decrease) from 2019 to 2020: Additional information: 1. On December 31, 2019, Mann acquired 25% of Bligh Corp.'s common shares for $266,000
> Davis Inc. is a privately held company that uses ASPE. Davis had the following information available at March 31, 2020: Davis Inc.'s partial list of comparative account balances as at March 31, 2020 and 2019, is as follows: Additional information: 1.
> Sharma Corporation has decided that, in preparing its 2020 financial statements under IFRS, two changes should be made from the methods used in prior years: 1. Depreciation. Sharma has used the tax basis (CCA) method of calculating depreciation for fina
> On December 31, 2020, before the books were closed, management and the accountant at Flanagan Inc. made the following determinations about three depreciable assets. 1. Depreciable asset A (building) was purchased on January 2, 2017. It originally cost $
> Conduit Corporation has 45 current employees: 5 managers and 40 non-managers. The average wage paid is $250 per day for non-managers. The company has just finished negotiating a new employee contract with the non-managers that would see this increase by
> The founder, president, and major shareholder of Dewitt Corp. recently sold his controlling interest in the company to a national distributor in the same line of business. The change in ownership was effective June 30, 2020, halfway through Dewitt's curr
> You are the auditor of Maglite Services Inc., a privately owned full-service cleaning company following ASPE. It is undergoing its first audit for the period ended September 30, 2020. The bank has requested that Maglite have its statements audited this y
> As at December 31, 2020, Kendrick Corporation is having its financial statements audited for the first time ever. The auditor has found the following items that might have an effect on previous years. 1. Kendrick purchased equipment on January 2, 2017,
> Refer to the information in P20.3. Instructions a. Prepare the journal entries that Situ would make on January 1, 2020, and the adjusting journal entries at December 31, 2020, to record the annual interest income from the lease arrangement, assuming t
> Leader Enterprises Ltd. follows IFRS and has provided the following information: 1. In 2019, Leader was sued in a patent infringement suit, and in 2020, Leader lost the court case. Leader must now pay a competitor $50,000 to settle the suit. No previous
> You have just been hired as the new controller of SWT Services Inc., and on the top of the stack of papers on your new desk is a bundle of draft contracts with a note attached. The note says, “Please help me to understand which of these leases would be b
> On May 5, 2021, you were hired by Gavin Inc., a closely held company that follows ASPE, as a staff member of its newly created internal auditing department. While reviewing the company's records for 2019 and 2020, you discover that no adjustments have ye
> You have been assigned to examine the financial statements of Picard Corporation for the year ended December 31, 2020, as prepared following IFRS. Picard uses a periodic inventory system. You discover the following situations: 1. The physical inventory
> It is December 2020 and Wagner Inc. recently hired a new accountant, Jodie Larson. Although Wagner is a private company, it follows IFRS. As part of her preparation of the 2020 financial statements for Wagner Inc., Jodie has proposed the following accoun
> Both the management of Kimmel Instrument Corporation, a small company that follows IFRS, and its independent auditors recently concluded that the company's results of operations will be reliable and more relevant in future years if Kimmel changes its met
> Access the financial statements of Air Canada and WestJet Airlines Ltd. for their years ended December 31, 2017, through SEDAR (www.sedar.com) or the companies' websites. Review the financial statements, including the notes, and then answer the following
> Nadeau Company, a small company following ASPE, is adjusting and correcting its books at the end of 2020. In reviewing its records, it compiles the following information. 1. Nadeau has failed to accrue sales commissions payable at the end of each of the
> The following facts pertain to a non-cancellable lease agreement between Woodhouse Leasing Corporation and McKee Electronics Ltd., a lessee, for a computer system: The collectibility of the lease payments is reasonably predictable, and there are no impo
> Your employer, Wagner Inc., is a large Canadian public company that uses IFRS 16. You have collected the following information about a lease for a fleet of trucks used by Wagner to transport completed products to warehouses across the country. The trucks
> Ramey Corporation is a diversified public company with nationwide interests in commercial real estate development, banking, copper mining, and metal fabrication. The company has offices and operating locations in major cities throughout Canada. With corp
> Synergetics Inc. leased a new crane to Gumo Construction Inc. under a six-year, non-cancellable contract starting February 1, 2020. The lease terms require payments of $21,500 each February 1, starting February 1, 2020. Synergetics will pay insurance and
> LePage Manufacturing Ltd. agrees to lease equipment to Labonté Ltée. on July 15, 2020. LePage follows ASPE and Labonté is a public company following IFRS 16. The following information relates to the lease agreement. 1. The lease term is seven years, wit
> On January 1, 2020, Hunter Ltd. entered into an agreement to lease a truck from Situ Ltd. Both Hunter and Situ use IFRS 16. The details of the agreement are as follows: Additional information: 1. There are no abnormal risks associated with the collecti
> Lanier Dairy Ltd. leases its milk cooling equipment from Green Finance Corporation. Both companies use IFRS 16. The lease has the following terms. 1. The lease is dated May 30, 2020, with a lease term of eight years. It is non-cancellable and requires e
> Gaming Inc. issued a debenture bond to Karamoutz Bank to finance new technology it developed. The debenture was for $500,000, issued at face value, with a 10-year term and interest payable at 10%. Gaming Inc.'s new technology proved not to be technically
> Under the temporary difference approach, the tax rates used for deferred tax calculations are those enacted at the balance sheet date, and affect how the reversal will be treated for tax purposes. Instructions For each of the following situations, dis
> The consolidated financial statements of Deutsche Lufthansa AG for the year ended December 31, 2017, are available in the company's 2017 annual report on the www.lufthansagroup.com website. Instructions a. What is included in the current liabilities f
> Shikkiah Corp. (which is a private enterprise) tries to attract the most knowledgeable and creative employees it can find. To help accomplish this, the company offers a special group of technology employees the right to a fully paid sabbatical leave afte
> Dubois Steel Corporation, as lessee, signed a lease agreement for equipment for five years, beginning January 31, 2020. Annual rental payments of $41,000 are to be made at the beginning of each lease year (January 31). The insurance and repairs and maint
> Lee Industries Inc. and Lor Inc. enter into an agreement that requires Lor Inc. to build three dieselelectric engines to Lee’s specifications. Both Lee and Lor follow ASPE and have calendar year ends. Upon completion of the engines, Lee has agreed to lea
> At the end of the December 31, 2019 fiscal year, Yin Trucking Corporation, which follows IFRS 16, negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were erected to the com
> Assume the same information as in P20.9. Instructions Answer the following questions, rounding all numbers to the nearest dollar. a. Assuming that Woodhouse Leasing Corporation’s accounting period ends on September 30, answer the fo
> Assume the same information as in P20.9. Instructions Follow the instructions assuming that McKee Electronics follows IFRS 16. From P20.9: The following facts pertain to a non-cancellable lease agreement between Woodhouse Leasing Corporation and McKe
> Interior Design Inc. (ID) is a privately owned business that provides interior decorating options for consumers. ID follows ASPE. The software that it purchased six years ago to present clients with designs that are unique to their offices is no longer s
> Dela Corporation initiated a defined benefit pension plan for its 50 employees on January 1, 2020. The insurance company that administers the pension plan provides the following information for the years 2020, 2021, and 2022: There were no balances as a
> Bouter Corporation Limited (BCL) began operations in 1996 and in 2006 adopted a defined benefit pension plan for its employees. By January 1, 2020, the defined benefit obligation was $510,000. On January 2, 2020, for the first time, BCL agreed to a new u
> Manon Corporation applies ASPE and sponsors a defined benefit pension plan. The following pension plan information is available for 2020 and 2021: The pension fund paid out benefits in each year. There were no actuarial gains or losses incurred on the D
> Access the financial statements for Loblaw Companies Limited for the year ended December 30, 2017 and Empire Company Limited for the year ended May 6, 2017, through SEDAR (www.sedar.com) and then answer the following questions. Instructions a. Calcula
> Brawn Corporation sponsors a defined benefit pension plan for its 100 employees. On January 1, 2020, the company's actuary provided the following information: The actuary calculated that the present value of future benefits earned for employee services
> You are the controller of a newly established technology firm that is offering a new pension plan to its employees. The plan was established on January 1, 2020, with an initial contribution by the employer equal to the actuarial estimate of the past serv
> The following information is available for HTM Corporation's defined benefit pension plan: On January 1, 2020, HTM Corp. amended its pension plan, resulting in past service costs with a present value of $78,000. Instructions a. Calculate the pension
> Dungannon Enterprises Ltd. sells a specialty part that is used in widescreen televisions and provides the ultimate in screen clarity. To promote sales of its product, Dungannon launched a program with some of its smaller customers. In exchange for making
> The Hwang Candy Corporation (HCC) offers a mini piggy bank as a premium for every five chocolate bar wrappers that customers send in along with $2.00. The chocolate bars are sold by HCC to distributors for $0.30 each. Ignore any cost of goods sold. The p
> Renew Energy Ltd. (REL) manufactures and sells directly to customers a special long-lasting rechargeable battery for use in digital electronic equipment. Each battery sold comes with a guarantee that the company will replace free of charge any battery th
> Smythe Corporation sells televisions at an average price of $850 and they come with a standard one-year warranty. Ignore any cost of goods sold. Smythe also offers each customer a separate three-year extended warranty contract for $90 that requires the c
> Brooks Inc. sells portable computer equipment with a two-year warranty contract that requires the corporation to replace defective parts and provide the necessary repair labour. During 2020, the corporation sells for cash 400 computers at a unit price of
> Newfoundland University recently signed a contract with the bargaining unit that represents full-time professors. The contract agreement starts on April 1, 2019, the start of the university's fiscal year. The following excerpt outlines the portion of the
> Brookfield Asset Management Inc. Access the financial statements and accompanying notes of Brookfield Asset Management Inc. for the year ended December 31, 2017, through SEDAR (www.sedar.com) or on the company's website and then answer the following ques
> Access the annual report for Air Canada for its December 31, 2017 fiscal year end from SEDAR or the company's website (www.aircanada.com). Also, access the annual report for the year ended December 31, 2017, for British Airways plc from the company's par
> Describe risk in finance as up and down movement of return. Does this idea make sense in terms of the variance definition?
> What is the fundamental motivation behind portfolio theory? That is, what are people trying to achieve by investing in portfolios of stocks rather than in a few individual stocks or in debt? What observations prompted this view?
> How is the IPO price of a stock determined? Is that price likely to be the stock’s intrinsic value.
> Do stocks that don't pay dividends have value? Why?
> Discuss the accuracy of stock valuation, and compare it with that of bond valuation.
> Describe the approach to valuing a stock expected to grow at more than one rate in the future. Can there be more than two rates? What two things have to be true of the last rate?
> What is meant by normal growth? Contrast normal and super normal growth. How long can each last? Why?
> Why are growth rate models practical and convenient ways to look at stock valuation?
> Verbally rationalize the validity of a stock valuation model that doesn't contain a selling price as a source of cash flow to the investor. Give two independent arguments.
> Why did securities analysts issue biased reports in the 1990s? In what direction were the reports biased?
> How and why is the U.S. dollar unique among the world's currencies?
> Describe the primary conflict of interest that caused the public accounting industry to fail in its duty to protect the investing public’s interests in the 1990s.
> Describe the feature of financial reporting that made leasing popular before FASB 13.
> Is investing in options really investing or is it more like gambling?
> Options are more exciting than investing in the underlying stocks because they offer leverage. Explain this statement.
> What does the efficient market hypothesis say? What is its implication for stock analysis?
> Compare fundamental analysis and technical analysis. Which makes more sense to you?
> Discuss the relative riskiness of investment in bonds, common stock, and preferred stock.
> Preferred stock is said to be a hybrid of common stock and bonds. Explain fully. Describe the cash flows associated with preferred stock and their valuation.
> What is the relationship between bond prices and interest rates? Verbally describe how this relationship comes about. How can we use this relationship to estimate the value of a bond?
> Discuss the nature of stock as an investment. Do most stockholders play large roles in the management of the firms in which they invest? Why or why not?
> What is a trade deficit, and why does it hurt us to consistently run a deficit with another country?
> Describe bond pricing as two time-value-of-money problems.
> Why do bonds have indentures?
> If bonds pay fixed interest rates, how can they be sold year after year on the secondary market? Include the idea of how yields adjust to changing market interest rates.
> Two interest rates are associated with pricing a bond. Name and describe each. How are they used? Describe a third rate not used in pricing.
> What is a call provision? Why do companies put them in bonds? Define: call-protected period and call premium/penalty
> Describe the nature of a bond. Include at least the following ideas. term/maturity face value debt vs. equity "buying" a bond non-amortized one borrower/many lenders risk conflict with stockholders
> How can two knowledgeable people come to different conclusions about the value of the same security? Can this happen if they have access to the same information?
> Contrast real assets and financial (paper) assets. What is the basis for the value of each?
> Corporate executives sometimes abuse their positions by overpaying themselves at the expense of stockholders. When that happens are the executives’ gains dollar for dollar losses to stockholders or can investors lose more or less than the amounts by whi
> How and why do sinking funds enhance the safety of lenders?
> Describe the difference between a floating and a fixed exchange rate system.
> Under what conditions is a bond almost certain to be called at a particular date in the future? How does this condition affect its price?
> The Greenbay Motor Company ordered six German built engines at, €15,000 each when the direct exchange rate was $1.2500 per euro, and elected not to cover the obligation with a forward contract. When the bill was due three months later, the rate was $1.1
> Suppose a car manufactured in Japan in the mid-1980s, when there were 250 yen to the dollar, cost 2 million yen to produce, and was marked up 25% for sale in the United States. Assume the car's cost in yen and markup are the same today, but that the e
> The Cline family made a trip to Europe in 2015. They paid the following amounts in local currency for hotel, entertainment, and transportation. How much did the trip cost once they got to Europe? Use the exchange rates in Table 18.1. England.
> Segwick Petroleum Ltd. has a dividend reinvestment plan in which new stock is issued to participating investors. Segwick's payout ratio is 40%, and 30% of stockholders participate in the plan. The firm's ROE is 10%. What percentage increase in flotati
> Bob and Chris received a grant through their University to travel to Germany to do research. The grant awarded them $2,000 for room and board during their stay. It was paid to them in U.S. dollars on May 31 at which time the dollar was worth €.77980.
> Atkins Company has just issued a series of bonds with 5- through 10-year maturities. The company’s default risk is 0.5% on 5-year bonds, and grows by 0.2% for each year that’s added to the bond’s term. Atkins’ liquidity risk is 1.0% on 5-year bonds, an
> The following direct quote exchange rates are found on the spot market today. a. Euro: $.9347 b. Israeli shekel: $.2586 c. British (U.K.) pound: $1.6544 d. Japanese yen: $0.009423 Calculate the price of a U.S. dollar in terms of each currency, the ind
> Using words only, describe the process of finding a bond's yield at a given selling price.
> Construct an amortization schedule for the last six months of the loan. (Hint: What is the unpaid balance at the end of 29 ½ years?)
