Question: The management of Luis Inc., a small

> 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

> 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 $50,0

> 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

> 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

> On January 3, 2014, Mega Limited purchased 3,000 shares (30%) of the common shares of Sonja Corp. for $438,000. The following information is provided about the identifiable assets and liabilities of Sonja at the date of acquisition: During 2014, Sonja re

> Both ASPE and IFRS require disclosures about an enterprise's investments that include the carrying amount of each type of investment by the accounting method used and the income, gains, or losses classified in a sin1ilar way. Identify the disclosure obje

> Finlay Limited constructed a building at a cost of $2.8 million and has occupied it since January 1994. It was estimated at that time that its life would be 40 years, with no residual value. In January 2014, a new roof was installed at a cost of $370,000

> Beckett Corp. is facing a decision of whether to purchase 40% of Kyla Corp.'s shares for $1.6 million cash, giving Beckett significant influence over the investee company, or 60% of Kyla's shares for $2.4 million cash, making Kyla a subsidiary company. T

> Use the information from BE9-19 except thatJulip Corporation is a private enterprise that applies ASPE. Prepare Julip’s 2014 entries to record all transactions and events related to its significant influence investment in Krov Corporation assuming (a) Kr

> Julip Corporation purchased a 25% interest in Krov Corporation on January 2, 2014, for $1,000. At that time, the carrying amount of Krov's net assets was $3,600. Any excess of the cost of the investment over Julip's share of Krov's carrying amount can be

> Poot Corporation purchased a 40% interest in Moss, Inc. for $100. This investment gave Poot significant influence over Moss. During the year, Moss earned net income of $15 and paid dividends of $5. Assuming the purchase price was equal to 40% of Moss's n

> Kolber Manufacturing Limited designs, manufactures, and distributes safety boots. In January 2014, Kolber purchased another business that manufactures and distributes safety shoes, to complement its existing business. The total purchase price was to be $

> Ramirez Company has an investment in 6%, 10-year bonds of Soto Company. The investment was originally purchased at par for $100 in 2013 and it is accounted for at amortized cost. Early in 2014, Ramirez recorded an impairment on the Soto investment due to

> Write a brief essay highlighting the differences between IFRS and ASPE noted in this chapter, discussing the conceptual justification for each.

> Echo Corp., a retail propane gas distributor, has increased its annual sales volume to a level that is three times greater than the annual sales of a dealer that it purchased in 2014 in order to begin operations. The board of directors of Echo Corp. rece

> On June 30, 2014, your client, Bearcat Limited, was granted two patents for plastic cartons that it had been producing and marketing profitably for the past three years. One patent covers the manufacturing process and the other covers related products. B

> Weaver Limited is a company that is a distributor of hard-to-find computer supplies such as hardware parts and cables. It sells and ships products all over the world. Recently the board of directors approved the plan and a budget for the company to desig

> In 1985, Lincoln Limited completed the construction of a building at a cost of $ 1.8 million; it occupied it in January 1986. It was estimated that the building would have a useful life of 40 years and a residual value of $400,000. Early in 1996, an add

> Biofuel Inc. (BI) is a private company that just started up this year. The company's owner, Sarah Biorini, created a process whereby carbon dioxide (CO2) emissions are converted into biofuel. Specifically, the C02 is pumped into a pond where algae is gro

> Dr. Gary Morrov’s a former surgeon, is the president and owner of Morrow Medical (MM), a private Ontario company that focuses on the design and implementation of various medical and pharmaceutical products. 'With the recent success of various products pu

> Monsecours Corp., a public company incorporated on June 28, 2013, setup a single account for all of its intangible assets. The following summary discloses the debit entries that were recorded during 2013 and 2014 in that account: The new business started

> Gelato Corporation, a private entity reporting under ASPE, was incorporated on January 3, 2013. The corporation's financial statements for its first year of operations were not examined by a public accountant. You have been engaged to audit the financial

> Information for Canberra Corporation's intangible assets follows: 1. On January 1, 2014, Canberra signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $75,000. Of this amount, $35,000 was paid when t

> Guiglano Inc. is a large, publicly held corporation. The following are six selected expenditures that were made by the company during the current fiscal year ended April 30, 2014. The proper accounting treatment of these transactions must be determined i

> The standard setters identify three approaches to accounting for the impairment of financial asset investments: an incurred loss model, an expected loss model, and a fair value model. Identify which models are required to be used by enterprises applying

> The president of Plain Corp., Joyce Lima, is thinking of purchasing Balloon Bunch Corporation. She thinks that the offer sounds fair but she wants to consult a professional accountant to be sure. Balloon Bunch Corporation is asking for $85,000 in excess

> Macho Inc. has recently become interested in acquiring a South American plant to handle many of its production functions in that market. One possible candidate is De Fuentes SA, a closely held corporation, whose owners have decided to sell their business

> On September 1, 2014, Madonna Lisa Corporation, a public company, acquired Jaromil Enterprises for a cash payment of $763,000. At the time of purchase, Jaromil's statement of financial position showed assets of $850,000, liabilities of $430,000, and owne

> Carras Corporation purchased $60,000 of five-year, 6% bonds of Hu Inc. for $55,133 to yield an 8% return, and classified the purchase as an amortized cost method investment. The bonds pay interest semi-annually. (a) Assum1ing Carras Corporation applies I

> In late July 2014, Mona Ltd., a private company, paid $2 million to acquire all of the net assets of Lubello Corp., which then became a division of Mona. Lubello reported the following statement of financial position at the time of acquisition: Current a

> Six examples follow of purchased intangible assets. They are reported on the consolidated statement of financial position of Phelp Enterprises Limited and include information about their useful and legal lives. Phelp prepares financial statements in acco

> Use the data provided in P1l2-7. Assume instead that Meridan Golf and Sports is a public company. The relevant information for the impairment test on December 31, 2016, is as follows: Data Provided in P12-7 Meridan Golf and Sports was formed on July 1,

> Meridan Golf and Sports was formed on July 1, 2014, when Steve Powerdriver purchased Old Master Golf Corporation. Old Master provides video golf instruction at kiosks in shopping malls. Powerdriver's plan is to make the instruction business part of his g

> In 2013, Aquaculture Incorporated applied for several commercial fishing licences for its commercial fishing vessels. The application was successful and on January 2, 2014, Aquaculture was granted 22 commercial fishing licences for a registration fee of

> During 2012, Medicine Hat Tools Ltd., a Canadian public company, purchased a building site for its product development laboratory at a cost of $61,000. Construction of the building was started in 2012. The building was completed in late December 2013 at

> Institute Limited organized late in 2013 and set up a single account for all intangible assets. The following summary shows the entries in 2014 (all debits) that have been recorded in intangible Assets since then: Instructions (a) Prepare the necessary e

> Tsui Corporation owns corporate bonds at December 31, 2014, accounted for using the amortized cost model. These bonds have a par value of $800,000 and an amortized cost of $788,000. After an impairment review was triggered, Tsui determined that the disco

> Instructions Go to the SEDAR website (www.sedar.com) and choose two companies from each of four different industry classifications. Choose from a variety of industries such as real estate and construction, food stores (under merchandising), biotechnology

> As the recently appointed auditor for Daleara Corporation, you have been asked to examine selected accounts before the six-month financial statements of June 30, 2014, are prepared. The controller for Daleara Corporation mentions that only one account is

> Machinery purchased for $56,000 by Wong Corp. on January 1, 2009, was originally estimated to have an eight-year useful life with a residual value of $4,000. Depreciation has been entered for five years on this basis. In 2014, it is determined that the t

> Selected information follows for Mount Olympus Corporation for three independent situations: 1. Mount Olympus purchased a patent from Bakhshi Co. for $1.8 million on January 1, 2012. The patent expires on January 1, 2022, and Mount Olympus is amortizing

> Berrie Inc. has the following amounts included in its general ledger at December 31, 2014: Organization costs ………………………………………………………………….…………….. $34,000 Purchased trademark ………………………………………………………….……..………….. 17,500 Discount on bonds payable ………………………………………

> Selected account information follows for Richmond Inc. as at December 31, 2014. All the accounts have debit balances. Instructions Identify which items should be classified as intangible assets. For the items that are not classified as intangible assets,

> The following is a list of items that could be included in the intangible assets section of the statement of financial position: 1. An investment in a subsidiary company 2. Timberland 3. The cost of an engineering activity that is required to advance a p

> Louvre Inc. bought a business that is expected to give a 25% annual rate of return on the investment. Of the total amount paid for the business, $75,000 was deemed to be goodwill, and the rest was attributed to the identifiable net assets. Louvre Inc. es

> As the president of Victoria Recording Corp., you are considering purchasing Moose Jaw CD Corp., whose statement of financial position is summarized as follows: Current assets $400,000 Plant and equipment (net) 750,000 Other assets

> Aswan Corporation is interested in acquiring Richmond Plastics Limited. Richmond has determined that its excess earnings have averaged approximately $17 5,000 and feels that such an amount should be capitalized over an unlimited period at a 15% rate. Asw

> Net income figures for Belgian Ltd. are as follows: 2010 ………………………………. $75,000 2011 ………………………………. $53,000 2012 ………………………………. $84,000 2013 ………………………………. $87,000 2014 ………………………………. $69,000 Future income is expected to continue at the average amount of the