Question: Repeat Exercise 1.4 from Chapter 1.

> The stated accounting policy treatment for foreign currency translation for SKF, a Swedish company, before it adopted IFRS was as follows: Translation of foreign financial statements The current rate method is used for translating the income statements a

> ‘The variety of possible methods of foreign currency translation, and the different ways of treating gains arising, show that adequate harmonisation for international comparison purposes is a long way away’. Discuss.

> (a) How would you define goodwill? (b) Three possible accounting treatments of goodwill are: (i) retain goodwill as an asset to be amortised over its estimated useful life; (ii) retain goodwill as an asset indefinitely, subjecting it to annual impairment

> The balance sheets of A and B as at 31 December 20X7 are as shown in Figure 14.8. In addition: (a) A had acquired 37,500 shares in B in 20X3 when there was a debit balance on the reserves of €3,000. (b) B purchases goods from A, providin

> Repeat Exercise 13.3, but now assume that non-current assets originally costing €30,000, with accumulated depreciation of €12,000, were sold for €11,000 during the year ended 31 December 20X2.

> If at all possible, compare your answer to Exercise 1.5 with the answers of students from different national backgrounds. Try to explore likely causes of any major differences that emerge, in terms of legal, economic and cultural environments.

> The balance sheet of Dot Co. for the year ended 31 December 20X2, together with comparative figures for the previous year, is shown in Figure 13.7 (all figures €000). You are informed that there were no sales of non-current assets durin

> Explain the concept of a ‘temporary difference’ in the context of IASB rules. Why is it thought necessary to account for deferred tax on these differences?

> In Activity 12.A, the balance on the deferred tax liability account is growing every year over the five-year period and, if tax conditions remain stable and annual investment continues to rise, then it will continue to grow. Could it be argued that, beca

> How might a company seek to raise extra finance in ways other than issuing new debt or equity securities?

> Distinguish between debt capital and equity capital and suggest which is likely to be favored by a company raising finance in a high-taxation environment.

> What uses of the word ‘reserve’ might be found in practice in various parts of the world?

> What is the definition of a fixed (or non-current) asset? Why is this difficult to use in the context of investments and why does that matter?

> What is meant by ‘lower of cost and net realizable value’? What difficulties exist in the application of this measurement basis?

> A firm buys and sells a single commodity. During a particular accounting period it makes a number of purchases of the commodity at different prices. Explain how assumptions made regarding which units were sold will affect the firm’s reported profit for t

> R and A are brothers. Recently, their aunt died leaving them €1,000 each. Initially, they intended setting up in partnership selling pils and lager. However, R felt that there was no future in the lager market, whereas A expected that lager sales would b

> In the context of your own national background, rank the seven ‘external’ user groups suggested in the text (i.e. omitting managers), in order of the priority that you think should be given to their needs. Explain your reasons.

> Using the information contained in Exercise 10.3 above, calculate the value of the year-end inventories using FIFO and LIFO. Also, prepare profit and loss accounts showing the gross profit under each of the valuation methods for all three years.

> Outline three different depreciation methods and appraise them in the context of the definition and objectives of depreciation.

> The payments set out in Table 9.8 have been made during the year in relation to a non-current asset bought at the beginning of the year. What cost figure should be used as the basis for the depreciation charge for the year and why?

> Provide in your own words: (a) an explanation of what depreciation is; (b) an explanation of the net book value (NBV) of a partially depreciated non-current asset.

> A company borrows money at 10 per cent interest in order to finance the building of a new factory. Suggest arguments for and against the proposition that the interest costs should be capitalized and regarded as part of the ‘cost’ of the factory. Which se

> On 21 December 20X7, your client paid €10,000 for an advertising campaign. The advertisements will be heard on local radio stations between 1 January and 31 January 20X8. Your client believes that, as a result, sales will increase by 60 per cent in 20X8

> Are depreciation expenses either too subjective or too arbitrary to provide useful information?

> The following actual and estimated figures are available. Based on these figures, evaluate the following. (a) Calculate annual depreciation under the straight-line method. (b) Calculate the depreciation charge for each of the four years under the reducin

> Explain the meaning of capital maintenance. Why is it important?

> What various alternatives to historical cost could be used for the valuation of assets? Which do you prefer?

> Do you think that users know what to ask for from their accountants or financial advisers? Explain your answer.

> What disadvantages are there in measuring assets on the basis of historical cost?

> What general rule can be used to decide whether a payment leads to an expense or to an asset?

> Why is it necessary to define an expense in terms of changes in an asset (or vice versa) rather than defining the terms independently?

> Figure 7.12 presents, in summarized form, the financial statements of Non Co. for the years 20X1 and 20X2. Six months after each of the two year-ends, a dividend of €20,000 is paid in relation to the results of that year. Prepare a tabl

> Business A and Business B are both engaged in retailing but seem to take a different approach to this trade according to the information available. The information consists of a table of ratios, shown as Table 7.9. Required: (a) Explain briefly how each

> The following information has been extracted from the recently published statements of company D, as set out in Figure 7.11. The ratios set out in Table 7.8 are those calculated for D based on its published statements for the previous year and also the

> If you live in, or work in connection with, a member country of the EU, investigate the progress in that country toward replacing national regulation to be in line with the 2013 Directive.

> Which presentation formats are usually used in your own jurisdiction? Why is this so?

> Is there a danger of having too much data in published financial statements?

> Discuss the advantages and disadvantages of the income statement formats allowed by the EU Directive, namely by function and by nature.

> The above information has been taken from the company´s books as at 31 December 20X1, but the following have not yet been allowed for. (a) Rent owing but not yet paid amounting to €1,000. (b) Insurance paid includes â&

> In which European countries have the standards of the IASB had the greatest influence?

> (a) Outline the objectives and achievements of the EU in the area of financial reporting. (b) Outline the objectives and achievements of the IASB and its predecessor in the area of financial reporting. (c) Do your answers to (a) and (b) suggest movement

> ‘The true and fair view requirement is now established in all European Union countries and so the aim of financial reporting has been harmonised’. Discuss.

> Do international differences in the rules for the calculation of taxable income cause accounting differences or is the influence the other way round?

> Bearing in mind that Section 5.5.2 of this chapter was written in 2019; rewrite it in the context of the time when you read this book.

> Who is supposed to obey accounting standards in the United States? Are they followed in practice?

> On 21 December 20X7, your client paid €10,000 for an advertising campaign. The advertisements will be heard on local radio stations between 1 January and 31 January 20X8. Your client believes that, as a result, sales will increase by 60 per cent in 20X8

> To what extent is the search for relevance of financial information hampered by the need for reliability?

> ‘Neutrality is about freedom from bias. Prudence is a bias. It is not possible to embrace both conventions in one coherent framework’. Discuss.

> Equity investors are major users of financial statements. Identify the general nature of the ‘information needs’ of this group of users. Describe the likely specific uses of company financial information by investors and give examples of information that

> Use the information for Landstalker Enterprises in BE7.15 and assume instead that the receivables are sold with recourse. Prepare the journal entry for Landstalker to record the sale, assuming that the recourse obligation has a fair value of $9,000 and t

> On October l, 2020, Alpha Inc. assigns $3 million of its accounts receivable to Alberta Provincial Bank as collateral for a $2.6-million loan evidenced by a note. The bank's charges are as follows: a finance charge of 4% of the assigned receivables and a

> Emil Family Importers sold goods to Acme Decorators for $20,000 on November 1, 2020, accepting Acme's $20,000, six-month, 6% note. (a) Prepare Emil's November 1 entry, December 31 annual adjusting entry, and May 1 entry for the collection of the note and

> Use the information for Battle Tank Limited in BE7.7 and assume instead that the unadjusted balance in Allowance for Doubtful Accounts is a debit balance of $3,000. Based on this, prepare the December 31, 2020 journal entry to record the adjustment to Al

> Battle Tank Limited had net sales in 2020 of $2.3 million. At December 31, 2020, before adjusting entries, the balances in selected accounts were as follows: Accounts Receivable $350,000 debit; Allowance for Doubtful Accounts $4,600 credit. Assuming Batt

> Use the information for Ropers Ltd. in BE7.5, but assume instead that Ropers follows ASPE and records expected outstanding returns to Allowance for Sales Returns and Allowances. Prepare the required adjusting journal entry at the end of the reporting per

> To promote the sale of some specialty goods, Ropers Ltd. began a generous return policy to its customers. Customers can return merchandise for up to three months following the date of the invoice, no questions asked. For the current period, sales of thes

> Staj Co., a clothing manufacturer, is preparing its statement of financial position at December 31, 2020. For each of the following amounts as at December 31, 2020, state whether the amount is (a) current or non-current (b) a trade receivable, a non trad

> Use the information in BE7.20. Assume that Genesis decides (a) to increase the size of the petty cash fund to $600 immediately after the reimbursement, and (b) to reduce the size of the petty cash to $250 immediately after the reimbursement. Prepare the

> The financial statements of BCE Inc. reported net sales of $21,719 million for its year ended December 31, 2016, and $21,514 million for its year ended December 31, 2015. Accounts receivable (net) were $2,979 million at December 31, 2016, $3,009 million

> Dunn Inc. owns and operates a number of hardware stores in the Atlantic region. Recently, the company has decided to open another store in a rapidly growing area of Nova Scotia. The company is trying to decide whether to purchase or lease the building an

> The financial statements of winery Andrew Peller Limited reported net sales of $342,606 thousand for its year ended March 31, 2017. Accounts receivable were $26,973 thousand at March 31, 2017, and $28,223 thousand at March 31, 2016. Calculate the company

> Stowe Enterprises owns the following assets at December 31, 2020: If Stowe follows ASPE, what amount should be reported as cash and cash equivalents? Explain how your answer would differ if Stowe followed IFRS.

> Assume the facts given in BE6.36 for Martin Corp. Prepare the December 31, 2021 yearend journal entry to record any loss from the contract assuming Martin uses the completed-contract method. Assume in BE6.36 for Martin Corp:

> Inexperienced construction company Martin Corp. signed a risky non-cancellable contract to build a research facility at a fixed contract amount of $2 million. The work began in early 2020 and Martin incurred costs of $900,000. At December 31, 2020, the e

> Assume the facts given in BE6.33 for Darwin Corporation. Assume billings for the construction contract were as follows: 2020, $500,000; 2021, $2 million; and 2022, $1. 7 million. Calculate the balance of the Contract Asset/Liability account at the end of

> Assume the facts given in BE6.33 for Darwin Corporation. Calculate the amount of gross profit or loss that should be recognized each year under the zero-profit method. Data of BE6.33:

> During 2020, Darwin Corporation started a construction job with a contract price of $4.2 million. Darwin ran into severe technical difficulties during construction but managed to complete the job in 2022. The contract is non-cancellable. Under the terms

> Guillen Inc. began work on a $7-million non-cancellable contract in 2020 to construct an office building. Guillen uses the completed-contract method under ASPE. At December 31, 2020, the balances in certain accounts were Contract Asset/Liability $715,000

> Turner Inc. began work on a $7-million non-cancellable contract in 2020 to construct an office building. During 2020, Turner Inc. incurred costs of $1.7 million, billed its customers for $1.2 million (non-refundable), and collected $960,000. At December

> Icon Construction Ltd. paid the following costs. For each item listed, determine if the costs are: (a) incremental costs to obtain a contract or (b) fulfillment costs incurred to perform the obligations under a contract. 1. Consulting fee for drafting a

> Assume the same information as in BE3.22 except that the note calls for quarterly instalment payments of $1,000. Before repeating the calculation, try to predict the outcome of the calculation and determine if the total interest will be higher or lower t

> On May 1, 2020, Mount Company enters into a contract to transfer a product to Eric Company on September 30, 2020. It is agreed that Eric will pay the full price of $25,000 in advance on June 15, 2020. Eric pays on June 15, 2020, and Mount delivers the pr

> On June 1, 2020, Mills Company sells $200,000 of shelving units to a local retailer, ShopBarb, which is planning to expand its stores in the area. Under the agreement, ShopBarb asks Mills to retain the shelving units at its factory until the new stores a

> On August 15, 2020, Japan Ideas consigned 500 electronic play systems, costing $100 each, to Yo Yo Toys Company. The cost of shipping the play systems amounted to $1,250 and was paid by Japan Ideas. On December 31, 2020, an account sales summary was rece

> For each of the scenarios noted in BE6.23, when would revenue be recognized under the earnings approach? Data of BE6.23: What is the earnings process under ASPE for each of the following scenarios? a. A manufacturer makes and sells farm equipment. The

> Refer to the revenue arrangement in BE6.20 and BE6.21. Perform step 4 of the five-step process for revenue recognition. Round percentage allocations to two decimal places and final amounts to the nearest dollar and prepare the journal entries for Geraths

> Refer to the revenue arrangement in BE6.20. Prepare the journal entries for Geraths on July 1, September 1, and October 15, 2020. Data of BE6.20: Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths also provide

> Geraths Windows manufactures and sells custom storm windows for three-season porches. Geraths also provides installation service for the windows. The installation process does not involve changes in the windows, so this service can be performed by other

> Mauer Company follows IFRS and sells consumer-relationship software to Hedges Inc. to be used for three years. In addition to providing the software, Mauer promises to provide consulting services over the life of the contract to maintain operability with

> Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines related to the prepaid telephone cards. Assume that Telephone Sellers se

> During February 2020, Master Massage Ltd. sells $10,000 of gift cards for Valentine's Day gifts. From reliable past experience, management estimates that 103 of the gift cards sold will not be redeemed. By the end of February, $4,000 was redeemed by cust

> Hung-Chao Yu Company issues a six-year, 8% mortgage note on January 1, 2020, to obtain financing for new equipment. The terms provide for semi-annual instalment payments of $112,825. What were the cash proceeds received from the issue of the note? Show c

> Manual Company sells goods to Nolan Company during 2020. It offers Nolan the following rebates based on total sales to Nolan. If total sales to Nolan are 10,000 units, it will grant a rebate of 23. If it sells up to 20,000 units, it will grant a rebate o

> Kristin Company sells 300 units of its products for $20 each to Logan Inc. for cash. Kristin allows Logan to return any unused product within 30 days and receive a full refund. The cost of each product is $12. To determine the transaction price, Kristin

> Use the information for Amodt Ltd. in BE6.13 and assume instead that the company follows ASPE. Follow the same instructions as in parts (a) and (b) in BE6.13. Data of BE6.13 On July 10, 2020, Amodt Ltd. sold GPS systems to retailers on account for a se

> On July 10, 2020, Amodt Ltd. sold GPS systems to retailers on account for a selling price of $700,000 (cost $560,000). Amodt grants the right to return systems that do not sell in three months following delivery. Past experience indicates that the normal

> On March 1, 2020, Parnevik Company sold goods to Goosen Inc. for $660,000 in exchange for a five-year, zero-interest-bearing note in the face amount of $1,062,937. The goods have an inventory cost on Parnevik's books of $400,000. (a) Determine the effect

> On January 2, 2020, Adani Inc. sells goods to Geo Company in exchange for a zero-interest-bearing note with a face value of $11 ,000, with payment due in 12 months. The fair value of the goods at the date of sale is $10,000 (cost $6 ,000). Assume that th

> Referring to the revenue arrangement in BE6.9, determine the transaction price for this contract, assuming (a) Nair is only able to estimate whether the building can be completed by August 1, 2020, or not (Nair estimates that there is a 703 chance that t

> How does a statement of cash flows prepared using the indirect method differ from one prepared using the direct method?

> Southern Corporation's adjusted trial balance contained the following accounts at December 31, 2020: Retained Earnings $120,000; Common Shares $700,000; Bonds Payable $100,000; Contributed Surplus $200,000; Preferred Shares $50,000; Goodwill $55,000; and

> Included in Cellin Limited's December 31, 2020 trial balance are the following accounts: Accounts Payable $251,000; Obligations under Lease $175,000; Unearned Revenue $141,000; Bonds Payable $480,000 (due October 31, 2032); Salaries and Wages Payable $12

> James Halabi is a financial executive with McDowell Enterprises. Although James has not had any formal training in finance or accounting, he has a "good sense" for numbers and has helped the company grow from a very small company ($500,000 in sales) to a

> Pine Corporation's adjusted trial balance contained the following asset accounts at December 31, 2020: Prepaid Rent $22,000; Goodwill $50,000; Franchise Fees Receivable $2,000; Intangible Assets- Franchises $47,000; Intangible Assets-Patents $33,000; and

> Lowell Corp.'s December 31, 2020 trial balance includes the following accounts: Inventory $120,000; Buildings $207,000; Accumulated Depreciation-Equipment $19,000; Equipment $190,000; Land Held for Speculation $46,000; Accumulated Depreciation-Buildings

> The following accounts are in Tan Limited's December 31, 2020 trial balance: Prepaid Rent $1,600; FV-OCI (Fair Value-Other Comprehensive Income) Investments $62,000; Unearned Revenue $7,000; Land Held for Speculation $119,000; and Goodwill $45,000. Prepa

> Kahnert Corporation's adjusted trial balance contained the following asset accounts at December 31, 2020: Cash $3,000; Treasury Bills (with original maturity of three months) $4,000; Land $60,000; Intangible Assets-Patents $12,500; Accounts Receivable $9

> Midwest Co. reported the following items in the most recent year: a. Calculate net cash provided (used) by operating activities, the net change in cash during the year, and free cash flow. Dividends paid related to the company's common shares and are tre

> Miller Ltd. engaged in the following cash transactions during 2020: Miller prepares financial statements in accordance with ASPE. Calculate the net cash provided (used) by investing activities.

> At December 31, 2020, the equity investments of Wang Inc. that were accounted for using the FV-OCI model without recycling were as follows: Because of a change in relationship with Ahn Inc., Wang Inc. sold its investment in Ahn for $153,300 on January 20