The value of Coca-Cola’s trademark has been estimated as billions of dollars. Yet, even though Coca-Cola reports over $12 billion of goodwill and other intangible assets, none of this reported value relates to the Coca-Cola trademark, which is unrecognized in the accounts despite its substantial commercial value. Case B Air Canada purchases Aeroplan Miles® from Groupe Aeroplan Inc., a separate corporation. Air Canada is an Aeroplan partner providing certain Air Canada customers with Aeroplan Miles®, which can be redeemed by customers for air travel or other rewards acquired by Aeroplan. Under the CPSA, the companies’ joint agreement, Aeroplan purchases passenger tickets from Air Canada to meet its obligation for the redemption of Aeroplan Miles® for air travel. The proceeds from the sale of passenger tickets to Aeroplan are included in advance ticket sales. Revenue related to these passenger tickets is recorded in passenger revenues when transportation is provided. For Aeroplan Miles® earned by Air Canada customers, Air Canada purchases Aeroplan Miles® from Aeroplan in accordance with the terms of the CPSA. The cost of purchasing Aeroplan Miles® from Aeroplan is accounted for as a sales incentive and charged against passenger revenues when the points are issued, which occurs upon the qualifying air travel being provided to the customer. Case C Calgary-based Suncor Energy Inc. explores and develops sites within the Alberta oil sands. The company will be responsible for restoring the sites in the future. At 31 December 2011, the company reported an estimate of $3.43 billion in decommissioning and restoration costs. The following explanation appears in Suncor’s disclosure notes (Note 4—Significant Accounting Estimates and Judgements): Decommissioning and Restoration Costs The company recognizes liabilities for the future decommissioning and restoration of exploration and evaluation assets and property, plant and equipment. These provisions are based on estimated costs, which take into account the anticipated method and extent of restoration, technological advances and the possible future use of the site. Actual costs are uncertain and estimates can vary as a result of changes to relevant laws and regulations, the emergence of new technology, operating experience, prices and closure plans. The expected timing of future decommissioning and restoration may change due to certain factors, including reserve life. Changes to assumptions related to future expected costs, discount rates and timing may have a material impact on the amounts presented. Required: For each of the preceding situations, discuss the issues relating to the recognition (or nonrecognition) of relevant elements in each company’s financial statements.
> Consider each of the following separate situations that arose in 20X1: 1. Corporation G invested $70,000 in corporate bonds as a short-term investment. The year-end 20X1 market value of the bonds is $63,000. The bonds are measured at fair value every rep
> Golf Inc. is a public company that has been in business since the 1980s. It owns and operates over 40 golf courses across Canada. It also owns and operates pro shops and dining facilities. On 1 November 20X4 GI announced it was going to sell three of its
> Haliteck Corp. is based in Halifax. At the end of 20X4, the company’s accounting records show the following items: 1. A $100,000 loss from hurricane damage. 2. Total sales revenue of $2,600,000, including $400,000 in the Decolite division, for which the
> The following information pertains to Junction Ltd. Corporation: - Income from continuing operations: $1,203,000 - Loss from discontinued operations: $126,000 - Gain on sale from discontinued operations: $24,400 - Net foreign exchange gain (loss) on tran
> 1. Using the information contained in A3-5, prepare: 1.A continuous SCI 2.A separate statement of income and statement of comprehensive income Data from A3-5: Quebecor Inc. is a major provider of cable services and also the owner of many newspapers. The
> Quebecor Inc. is a major provider of cable services and also the owner of many newspapers. The company reported the following items in its 20X1 financial statements (in millions of Canadian dollars, except per-share amounts): a. Revenues $4,206.6 b. Cost
> The information below pertains to the operations of Montreal Retail Corporation for the year ended 31 December 20X6: Cost of merchandise sold $102,000 Inventory warehousing cost 20,000 Accounts payable 120,000 Sales revenue 525,000 Accumulated depreciati
> The following items were taken from the adjusted trial balance of the Bremeur Corp. on 31 December 20X5. Assume an average 20% income tax on all items (including the divestiture loss). The accounting period ends 31 December. All amounts given are pre-tax
> Identify each of the following statements as true or false. 1. All companies are required to provide basic and diluted EPS calculations. 2. Public companies are required to provide EPS calculations before and after a discontinued operation. 3. Basic EPS
> Ceti Co. sells environmentally friendly coffee cups through an online store. The company is owned by Ceti Kadi. The following transactions took place over the first two years of operations: 20X1 Purchased 8,000 units for resale at $9 each 20X1 Purchased
> Mytel Corporation owns and operates a variety of restaurants, hotels, and budget lodging. In June 20X8, the management of Mytel Corporation decided to sell off its budget lodging operations, as the rate of return on the division’s assets was lower than m
> You have been asked to prepare the financial statements for Neema Corp., a private Canadian corporation, for the year ended 31 December 20X4. The company began operations in early 20X4. The following information is available about its business activities
> Return to A3-18 and assume instead that Mira Products is a private company reporting in accordance with ASPE. How would the reorganization affect Mira’s 20X4 financial reporting? Data from A3-18: Leos Janacek is CEO and controlling shareholder of Mira P
> Cayman Islands–based Harris Corp. is in the beauty industry. The company develops and produces a wide range of products for hair and skin care. The products are sold both at wholesale (through professional beauty supply stores) and retail (through variou
> The 31 December 20X2 year-end trial balance for Dynamics Ltd., a private company, showed the following account balances: The company pays income tax at a rate of 20%. Required: Prepare an income statement and a statement of retained earnings for the year
> You have been tasked with preparing the statement of income for Tulipe Company, a public company with 45,000 common shares outstanding. The board of directors has not yet determined whether they prefer the look of a “single-step” income statement, or a “
> The following transactions have been encountered in practice. Assume that all amounts are material. 1. A company decided to put the assets of one product line up for sale (intended to be sold within next year) because management had decided to outsource
> Leos Janacek is CEO and controlling shareholder of Mira Products Inc., a Vancouver-based company listed on the TSX. Mira’s principal business is the manufacture of furniture for small children. The company has two product lines: (1) home furniture and (2
> Marcella Ltd. (ML) is a Northern Ontario–based manufacturer of building materials. In the fourth quarter of 20X1, ML’s board of directors agreed with senior management that the company needed to restructure its operations so as to be more competitive, as
> On 2 October 20X4 a national hardware retailer, One Hardware Corporation, announced a formal plan to refocus its operations. As part of the plan, management decided to sell its portfolio of contractor-specific locations, which operated under the brand Co
> Play Cloth Company, a retailer of children’s clothing, decided to dispose of its European division. The company announced the plan to sell the division on 20 March 20X1. Once the announcement was made, management hired a professional services firm to as
> Loschiavo Ltd. (LL) has a 31 December fiscal year-end. LL disposed of its Computer Programming Group (CPG) on 31 July 20X3. CPG had a net loss (after taxes) of $18,800,000 in 20X3, to the date of disposal. The division was sold for $237,800,000 in cash p
> Salamander Inc. is a food processing company that operates divisions in three major lines of food products: cereals, frozen fish, and candy. On 13 September 20X1, the board of directors voted to put the candy division up for sale. The candy division&acir
> On 1 August 20X5, Graham Ltd. decided to discontinue the operations of its services division. The services division is not a separate corporation, but it is a major operating segment, financially and operationally. On 22 September 20X5, Graham closed a d
> Black Media Inc. owns and operates a large number of newspapers across Canada. On 1 October 20X5, the board of directors voted unanimously to dispose of one of those newspapers, The Daily Con. Black Media would continue to publish The Daily Con while a b
> Zhang Zinc Mines Ltd. decided on 1 April 20X8 to dispose of one of its mining properties in northern Ontario. The property consists of mineral rights (an intangible asset) and the on-site mining equipment. The mineral rights have a carrying value of $1,0
> Manufacturing Ltd. (ML) discontinued use of three assets during 20X2: 1. A specialized piece of equipment that originally cost $200,000 when purchased was shut down and placed in the far corner of the manufacturing facility on 30 June. It is being deprec
> Hoskins & Sells is a partnership that was established in March 20X6. If a partner decides to leave the partnership, the value of her or his partnership share will be determined by the net book value of the partnership’s net assets at the end of the last-
> For each of the following situations, give the letter item(s) indicating the accounting principle involved. Some letters may be used more than once, and some may not be used at all. 1. Continuity 2. Neutrality 3. Comparability 4. Cost/benefit effectivene
> Financial statement elements have specific definitions. To the right, some important aspects of the definitions are listed. Match the aspects with the elements by entering appropriate letters in the blanks. More than one letter can be placed in a blank.
> On 1 January 20X1, Tyler Trading Corp. was incorporated by Jim Tyler, who owned all the common shares. His original investment was $100,000. Transactions over the subsequent three years were as follows: 02 January 20X1: Purchased 20 units for resale at $
> In each of the following situations, identify the element or elements, if any, that would appear in financial statements. If no element is recognized, give the reason. 1. Unpaid gas bill. 2. A patent on a new invention for which the market is unknown. 3.
> For each of the following transactions, indicate the point at which (1) the initial transaction is recognized and (2) the financial statement element is realized: 1. Inventory is purchased on credit on 1 August and is received on 14 August. It is paid fo
> The following list of statements poses conceptual issues: 1. The business entity is considered separate and apart from its owners for accounting purposes. 2. A transaction is always recorded in such a way as to reflect its legal form. 3. It is permissibl
> Indicate whether the following statements are true or false. For a false statement, write “false,” and briefly indicate why the statement is false. 1. Full disclosure involves telling financial statement users everything about the company’s transactions.
> For each of the following situations, indicate whether you agree or disagree with the practice described, list one accounting concept/assumption/qualitative criteria/measurement method that is related to the situation (either followed or violated), and i
> Accounting measurements are enhanced by the presence of the qualities of relevance (predictive and confirmatory value), comparability, verifiability, timeliness, and faithful representation. For each of the following, indicate the quality demonstrated: 1
> Xuan Corp., a private company, is assessing several transactions that occurred during the 20X3 financial year and is deciding how these items should be recorded. Management understands that judgement is required as well as the application of various key
> The independent auditor of Fluidity Inc. found the following situations: 1. The company uses the straight-line method of measuring depreciation on manufacturing machinery, even though it knows that a method based on actual usage would provide better matc
> Indicate if each of the following items would be recognized in TelCan Ltd.’s financial statements for 20X3 and, if so, what elements would be recognized. For any items that would not be recognized, explain the reason for nonrecognition. 1. TelCan issued
> Which of the following events would normally cause revenue recognition, assuming use of accrual accounting and transfer of title on delivery? 1. Collection of cash from a customer 30 days after the product is delivered. 2. Collection of cash from a custo
> Identify the level in the hierarchy that would be most appropriate for measuring the following items using the fair-value hierarchy: Required: Identify the most appropriate value of the hierarchy to measure each item.
> In each of the following cases, indicate the principle(s) that appears to have been violated: Case A: For its factory equipment, Unrequited Love Inc. used accelerated depreciation in 20X2; straight-line in 20X3; and accelerated in 20X4. Case B: Aaronist
> Tannino Ltd. is a private investment company that manages investments for a group of about 30 wealthy individuals. The company is owned and managed by two experienced investment managers, each of whom owns 50% of the shares. The company merges all of its
> Review each of the independent scenarios provided. For each one, state which stage of the accounting policy choice process the scenario would likely occur at. 1. Management acknowledges there is no active market for an asset it is considering purchasing.
> Johnny Rose is an accounting student learning about ASPE and IFRS. Johnny has heard that ASPE’s conceptual framework provides less detail and has a different focus. You, Wan Wu, have recently graduated from a four-year accounting program and feel you hav
> The financial statements of Raychem Corporation included the following note: During the current year, plant assets were written down by $8,000,000. This writedown will reduce future expenses. Depreciation and other expenses in future years will be lower,
> For each of the following independent transactions, apply the concepts of recognition and realization and state at what point each occurs. 1. Company Y issued 10,000 shares at $10,000 dollars for cash. 2. ABC Company estimates that it will incur $45,000
> For each of the following transactions, indicate the point at which (1) the initial transaction is recognized and (2) the financial statement element is realized: 1. A customer pays $3,000 relating to a deposit for work to be completed in the following f
> In ASPE if a contingent loss (lawsuit) is reasonably measurable and likely to be incurred, the amount is accrued in the financial statements. If the amount is not measurable or is not likely to be incurred, then the potential loss is disclosed but not re
> The bookkeeper for Branford Ltd. has drawn up a financial statement on 31 December 20X1. Some of the items on the draft balance sheet are as follows: Cash $400,000 Consists of 300,000 Canadian dollars in the bank, plus 100,000 Hong Kong dollars held in
> Which measurement method would be most appropriate for the following items: historical cost or current value? For current value, specify which of the three measurement bases applies. 1. Inventory 2. Derivative 3. Building 4. Bond 5. Note receivable (2 ye
> Carleton Builders Ltd. recorded the following summarized transactions during the current year: 1. The company originally sold and issued 100,000 common shares. During the current year 6,000 shares were repurchased from the shareholders and retired. Near
> An examiner’s close inspection of the annual financial statements and the accounting records revealed that Mawani Inc. may have violated some accounting principles. The examiner questioned the following transactions: 1. Merchandise purchased for resale w
> Marianne Corp. has hired you on a contract basis to review its accounting decisions which were made during the current year ended 31 December 20X1. Marianne Corp. uses IFRS for financial reporting. Required: Review the following items and explain whether
> Marcon Properties Ltd. is a diversified private company that owns approximately 60 retail properties that the company has operated as discount department stores. These stores are small, stand-alone properties that Marcon owns outright, although most prop
> Entities may have a variety of corporate reporting objectives specific to their circumstances, such as: 1. Assessing and predicting cash flows 2. Minimizing current income taxes 3. Complying with restrictive covenants (specifically, debt covenants that s
> You have been hired as the assistant in the finance department of a medium-sized publicly traded firm. Realizing the importance of accounting to your new duties, you have recently completed an intensive introductory course in financial accounting. In thi
> Privately owned BlueScreen Corporation is primarily a retailer of computer equipment for individuals and small business. The company also develops software intended for small business applications—that is, for companies with up to 500 employees. The soft
> Discuss the bias, objectives, and potential conflicts that may exist between the following users/groups: 1. Bank with a current ratio debt covenant and management of a public company with a bonus based on net income 2. Bank assessing whether to extend ad
> The CPA Canada Handbook in both Part I and Part II sets out the objectives of general purpose financial statements, but companies and their managers have objectives that relate to their specific circumstances. Explain how managers’ objectives impact the
> The reporting situations of two different companies are described below: 1. Stardust Explorations Incorporated (SEI) is seeking significant new financing for a gold and diamond mining venture in northern Ontario. In their search for new financing, compan
> Which measurement method would be most appropriate for the following items: historical cost or current value? For current value, specify which of the three measurement bases applies. 1. Decommissioning costs 2. Shares in a public company 3. Land 4. Lease
> Four different unrelated Canadian corporations are described below: 1. Privately owned Vancouver-based Moonburst Coffee Ltd. imports coffee beans from around the world, but mainly from South America. The company roasts and packages the coffee and distrib
> A manager of a medium-sized private company recently asked for your advice on the following: I’m very confused about whether our company should continue to use ASPE or convert to IFRS. Our Canadian bank requires that we stay under a specific debt-to-equi
> For each of the situations below, explain whether the company can use its preferred basis of accounting: 1. A Great Lakes shipping company based in Thunder Bay, Ontario, wishes to use U.S. dollars as its presentation currency. Shipping on the Great Lakes
> A private company has two debt covenants in place: 1. Maximum debt-to-equity ratio. Current and long-term liabilities, excluding future income taxes, are divided by total shareholders’ equity. 2. Minimum times-interest-earned ratio. Income before interes
> For each of the situations listed below, state what judgements and/or estimates are necessary when preparing financial statements at each business’s fiscal year-end of 31 January: 1. Due to no snow fall in December, a ski store has an unexpectedly large
> You have recently attended a conference on behalf of your manager. One speaker from a large bank, Mr. Stearns, stated: With the advent of international accounting standards, we now can easily compare the financial results of companies across borders when
> The IASB is the standard-setting body for IFRS. Anyone who uses financial statements should understand the process by which standards are set. Required: Consult the IASB website (http://www.ifrs.org). Click “About us,” then “How we set IFRS® Standards.”
> Indicate whether the use of IFRS or ASPE is either required or more likely for the following entities as preparers of financial statements:
> The language of accounting is littered with acronyms, abbreviations for common organizations or phrases. Match the phrase or organization on the left with its abbreviation. Phrase or Organization 1. International Accounting Standards Board 2. Accounting
> Indicate whether each statement is true or false: 1. IFRS and the CPA Canada Handbook, Part II, have equal status in Canada for financial reporting. 2. In a private corporation, the needs of external users have no impact on the company’s financial report
> At the beginning of 20X5, its first year of business, Marsalis Ltd. invested $64,000 in inventory and $300,000 in equipment. Total sales were $160,000. Of the initial inventory purchases, $25,000 remained in inventory at the end of the period. Marsalis d
> Indicate whether each statement is true or false: 1. The IASB has authority for setting Canadian accounting standards. 2. All Canadian corporations must comply with international accounting standards. 3. Most public Canadian corporations are listed on th
> On 3 January 20X5, London Company entered into a joint arrangement with two other investors to develop a gold mine called JDX Gold. Based on the contractual arrangement, London will have rights to the net assets and net income of JDX Gold. London has a 2
> On 3 January 20X4, Windsor Company purchased 30% of the shares of Brampton for $565,000 cash. Windsor will use the equity method. On this date, Brampton has $2,000,000 of assets, $1,600,000 of liabilities, and $400,000 of equity. Book values reflect fair
> In 20X1, FYY Ltd. purchased 500 shares of Humor Inc. for $6,000 plus $500 in commission. The shares had a fair value of $19,000 at the end of 20X1, $25,000 at the end of 20X2, and $40,000 at the end of 20X3. In 20X4, the shares were sold for $31,000 less
> On 30 June 20X2, King Ltd. purchased 10,000 shares of Prince Inc. for $12,000 plus $1,000 in commission. In 20X2, the company received $500 of dividends, and the shares had a fair value of $16,000 at the end of the year. In 20X3, there were no dividends
> On 1 July 20X2, King Ltd. purchased $500,000 bonds of Princess Inc. at par. The bonds pay 6% interest annually on June 30. The bonds mature on 30 June 20X9. King has a June 30 year-end. At 30 June 20X3, King assessed that the credit risk of the Princess
> On 1 January 20X2, Speedy Company purchased $3,000,000 of Wind Corp. 3% bonds, classified as an FVOCI-Bond investment for $2,737,438. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase
> On 1 January 20X2, Lucky Company purchased $5,000,000 of Fire Corp. 3% bonds, classified as a FVTPL. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 4% on the date of purchase. The bonds mature on 30 December
> On 1 January 20X4, Queen Company purchased $5,000,000 of Sport Corp. 7% bonds, classified as an FVOCI-Bonds investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds ma
> IFRS or ASPE? - 20% investment in publicly traded company. Significant influence exists. - 25% investment in private company. Significant influence exists. - 70% investment in private company. Control exists. - 75% investment in publicly traded company.
> Oundjian Corporation recently sold inventory for $140,000. The goods had originally cost $94,000. Inflation during the period was 5%. The goods could be replaced from their long-time supplier for $115,000. For simplicity, assume that there are no other c
> IFRS or ASPE ? - Investment in 10-year bonds. Bonds were purchased when interest rates were high. Rates are expected to decline, and when this happens the bonds will be sold. - Investment in 10-year bonds with the intention to hold until maturity. Howeve
> On 1 July 20X2, a company bought an investment in IBM bonds at par for US$50,000 when the exchange rate was US$1 = Cdn$1.12. The investment is classified as FVTPL. The company paid cash on the acquisition date. At 31 December, the exchange rate was US$1
> On 1 January 20X2, Investor Company purchased $1,000,000 of Operating Corp. 5% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 6% on the date of purchase. The bonds matu
> Montonne Corp. is a private company that complies with ASPE. Montonne has a piece of equipment that cost $254,000. Its useful life to the company is estimated to be 15 years, after which it is expected to have a net residual value of $125,000. The equipm
> Bovine Ltd. has the following assets in a CGU: The recoverable amount has been determined to be $1,500. The separate fair value less costs of disposal for land is $600; no other assets could be separately valued. Required: 1. Allocate the impairment loss
> Food Inc., a public company, has a machine that processes and packages tuna in oil. This machine cannot be used for any other purpose. The machine originally cost $100,000 and is being amortized on a straight-line basis over 20 years. The carrying amount
> Innovative Inc. has a piece of equipment with a carrying amount of $175,000. Technology has changed, indicating that the machine may be impaired. A new machine with updated technology could be purchased for $350,000. A used machine of similar vintage is
> Phillips Ltd. purchased a machine on 26 March 20X3 for $90,000 and began to use it immediately. The estimated useful life of the machine is 5 years, and it has an expected residual value of $10,000 at that time. Phillips uses straight-line depreciation.
> XYZ Inc. has a building it purchased for $400,000. It is estimated the building has a useful life of 25 years and zero residual value. The building has three major components. XYZ uses the straight-line method of depreciation. Required: 1. What is the am
> Vert Ltd. purchased a vehicle on 1 January 20X8 for $34,000 and began to use it immediately. The estimated physical life of the vehicle is 20 years, but the estimated useful life to Vert is 10 years. The vehicle has an estimated residual value of $8,000.
> In the blanks provided to the left below, enter the letters of the underlying assumption, measurement method, qualitative criteria, or constraint most closely associated with the statements. Some letters may be used more than once and some may not be use
> Indicate whether the use of IFRS or ASPE is either required or more likely for the following entities as preparers of financial statements:
> Bailey Delivery Company, Inc., was organized in 2021 in Wisconsin. The following transactions occurred during the year: a. Received cash from investors in exchange for 10,000 shares of stock (par value of $1.00 per share) with a market value of $4 per sh
> Higgins Company began operations last year. You are a member of the management team investigating expansion ideas that will require borrowing funds from banks. On January 1, the start of the current year, Higgins’ T-account balances wer
> Consolidated Edison, Inc. (Con Edison), is a public utility company operating primarily in New York whose annual revenues exceed $12 billion. It reported the following December 31 simplified balances in its statement of stockholders’ eq
