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Study Resources (Accounting)

Ex. 20-96Accounting for a capital lease by the lessee Explain the procedures used by the lessee to account for a capital or finance lease. Ex. 20-97Capital lease amortization and journal entries Erica Corp. leases machinery on January 1, 2017, and records this as a finance lease. Seven annual lease payments of $140,000 are.
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46. Claudius Ltd. sold equipment during calendar 2017 for $19,000 cash. The original cost of the equipment was $46,000, and the accumulated depreciation to the date of sale was $24,500. This transaction should be shown on Claudius’ 2017 statement of cash flows (indirect method) as a(n) a) addition to net income.
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Pr. 20-122Lessee accounting—capital lease On January 1, 2017, Fargo Corp. enters into a ten-year non-cancellable lease with Wells Ltd. for equipment having an estimated useful life of 11 years and a fair value of $6,000,000. Fargo's incremental borrowing rate is 8%, but they do not know Wells’ implicit rate. Fargo uses.
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Ex. 22-69 Direct and indirect methods Explain and compare the direct method and the indirect method of preparing a statement of cash flows. *Ex. 22-70 Calculations for statement of cash flows (indirect method) During 2017, equipment was sold for $15,000. This equipment originally cost $24,000 and had a book value of $14,000 at.
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PROBLEMS Pr. 21-58 Correction of errors in prior years Goldfinch Inc. reported net incomes for the last three years as follows: 2015, $62,000;2016, $63,000;2017, $60,000 In reviewing the accounts in 2018 (after the books for the prior year had been closed), you find that the following errors have been made: 2015 2016 2017  Overstatement of ending inventory.................$7,000$8,500$4,000 Understatement of.
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Ex. 20-109 Recording a manufacturer/dealer lease On January 1, Lexy Corp. leases a truck they have manufactured to Roxy Corp.Lexy has calculated the lease payments to Roxy to be $40,000 per year for 4 years and the sales price of the truck is $130,000.It cost Lexy $100,000 to manufacture the truck.Record.
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Ex. 20-98 Lease liabilities What approach does IFRS use and what items need to be considered in determining the lease liability? Ex. 20-99 Initial measurement of right-of-use asset and lease liability Larry Co.leases a fleet of vehicles to Curly Co. for 5 years.The annual lease payment, due at the beginning of the year.
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Exercises Ex. 22-62 Classification of cash flows and transactions Assuming the company follows ASPE, give: a)three distinct examples of investing activities. b)three distinct examples of financing activities. c)three distinct examples of significant non-cash transactions. d)two examples of transactions not shown on a statement of cash flows. Ex. 22-63 Effects of transactions on the statement of cash flows.
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Ex 20-100 Differences between approaches What are the differences between capital and operating leases under ASPE? Ex. 20-101Reasons companies resist capital leases Companies have resisted having an increased recognition of capital leases, what arguments have companies used against capitalization? Ex. 20-102 Operating lease calculations On January 1, 2017, Lewis Corp. purchased a building for $900,000,.
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Ex. 22-66 Preparation of statement of cash flows (indirect method) The following information is taken from Green Lake Corporation's financial statements. Green Lake adheres to ASPE:           December 31         2017     2016 Cash.................................................$  92,000$  27,000 Accounts receivable.....................................95,00080,000 Allowance for doubtful accounts............................(4,500)(3,100) Inventory..............................................145,000175,000 Prepaid expenses.......................................7,5006,800 Land..................................................93,00060,000 Buildings..............................................287,000244,000 Accumulated depreciation.................................(35,000)(13,000) Patents, net of accumulated amortization.....................    20,000    35,000 Total Assets............................................$700,000$611,700 Accounts payable.......................................$  90,000$  84,000 Accrued liabilities........................................54,00063,000 Bonds payable..........................................125,00060,000 Common shares........................................100,000100,000 Retained.
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MULTIPLE CHOICE—Computational 26. Caspar Corp. began operations on January 1, 2016, and uses FIFO to cost its inventory. Management is contemplating a change to the average cost method and is interested in determining what effect such a change will have on pre-tax income. Accordingly, the following information has been developed: Ending Inventory2016   2017    FIFO$240,000$270,000 Average.
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MULTIPLE CHOICE—Conceptual 1. Which of the following is NOT considered to be an accounting change? a) change in accounting estimate b) change in the composition of the board of directors c) change in accounting policy d) correction of a prior period error 2. One condition required by IFRS is that a voluntary change in accounting policy.
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Pr. 21-59Accounting for accounting changes and error corrections Parrot Corp. reported net incomes for the last three years as follows: 2017   2016   2015    $240,000$225,000$180,000 During the 2017 year-end audit, the following items come to your attention: 1.Parrot bought a truck on January 1, 2014 for $98,000 cash, with an $8,000 estimated residual value and a six-year life..
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MULTIPLE Choice—Computational Use the following information for questions 26–27. Marcellus Corp. provided the following information for calendar 2017: Marcellus adheres to ASPE. Proceeds from issuing bonds...................$200,000 Purchase of inventories........................380,000 Purchase of treasury shares....................60,000 Purchase of long-term investment................280,000 Dividends paid to preferred shareholders..........40,000 Proceeds from issuing preferred shares...........160,000 Proceeds from sale of equipment................40,000 26. The cash provided by (used in) investing.
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Ex. 22-67 Preparation of statement of cash flows (format provided) Comparative statements of financial position for Burgundy Bay Ltd. are shown below: Burgandy adheres to ASPE. BURGUNDY BAY LTD. Statements of Financial Position ___December 31__ 20172016 Cash................................................$  30,900$  10,200 Accounts receivable (net)................................48,30020,300 Inventory.............................................35,00042,000 Long-term investments..................................015,000 Property, plant & equipment..............................236,500150,000 Accumulated depreciation...............................   (37,700)   (25,000) Total Assets$313,000$212,500 Accounts payable......................................$  19,000$  26,500 Accrued liabilities......................................19,00017,000 Long-term notes payable................................70,00050,000 Common shares.......................................130,00090,000 Retained.
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Ex. 20-94 Hidden costs in leases Many car dealerships will advertise car leases for 0% financing. Does 0% financing actually exist or are their hidden costs associated with the lease? If, so what are some examples. Ex. 20-95 Lessor accounting—sales-type lease Albert Corp., a private corporation that adheres to ASPE, is a manufacturer.
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Ex. 22-72 Cash flows from operating activities (indirect and direct methods) Presented below is the latest income statement of Oxford Ltd.: Sales......................................$380,000 Cost of goods sold............................  225,000 Gross profit..................................$155,000 Operating expenses...........................    85,000 Income before income taxes....................70,000 Income taxes................................    28,000 Net income..................................$  42,000 In addition, the following information related to net changes in working capital is available:    Debit  Credit Cash.......................................$12,000 Accounts receivable.
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EXERCISES Ex. 20-83 IAS 17 versus IFRS 16 Explain the issues with IAS 17 compared to IFRS 16. Ex. 20-84 IFRS 16 effective date When is the effective date for IFRS 16 and is US GAAP adopting a similar standard? Ex. 20-85Types of lessors Explain the difference between a manufacturer finance company and an independent finance.
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Ex. 20-107Accounting for a direct financing lease by the lessor Explain the procedures used to account for a direct financing lease (ASPE) or finance lease (IFRS) by the lessor. Ex. 20-108 Accounting for a sales-type lease by the lessor Explain the procedures used to account for a sales-type lease (ASPE) or manufacturer or.
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56. When the equipment was sold, the Buildings and Equipment account was credited with a) $48,000. b) $56,000. c) $80,000. d) $104,000. 57. The book value of the buildings and equipment at December 31, 2017 was a) $508,000. b) $520,000. c) $588,000. d) $712,000. 58. The balance in the Accounts Payable account at December 31, 2017 was a) $148,000. b) $108,000. c) $44,000. d).
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Ex. 21-54 Effects of errors on financial statements Show how the following independent errors will affect net income on the income statement and the shareholders' equity section of the statement of financial position (SFP) using the symbol + (plus) for overstated, – (minus) for understated, and 0 (zero) for no effect.     2016               2017            .
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Ex 20-91Discount rates For the lessee discuss what discount rates should be used and the rationale behind the rate for ASPE and IFRS. *Ex. 20-92 Classification approach vs. contract-based approach Explain the difference between classification approach vs contract-based approach for capitalizing leases. Which does the IASB favour? Why? * Ex. 20-93 Calculate lease payment by.
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Ex. 20-87 IFRS 16 classification of leases Under the new IFRS 16 what are leases classified as and how are they accounted for?What are the two exceptions to this standard? Ex. 20-88Lease criteria under IFRS 16 Discuss the criteria cited by IFRS 16 to support classifying a lease as a finance lease. Ex. 20-89Lease.
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Ex. 20-114 Differences between ASPE and IFRS 16 Discuss the differences between ASPE and IFRS 16 in recognition of leases by lessee. Ex. 20-115Differences between ASPE and IFRS 16 Discuss the differences between ASPE and IFRS 16 in recognition of leases by the lessor. *Ex. 20-116Lessee and lessor accounting (sale-leaseback) On January 1, 2017, Baritone.
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Ex. 20-117 Sale-leaseback transactions Why would a company enter into a sale-leaseback transaction? *Ex. 20-118 Lessee and lessor accounting (sale-leaseback) On January 1, 2017, Kirk Corp. sells land to Spock Inc. for $2,000,000, and immediately leases the land back. Both companies follow ASPE. The following information relates to this transaction: 1.The term of the.
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EXERCISES Ex 21-47 Overall objectives of accounting and disclosure standards for accounting changes What are the three main objectives of accounting and disclosure standards for accounting changes? Ex. 21-48 Conditions for a change in accounting policy under IFRS and ASPE What conditions are allowed for a change in accounting policy to be acceptable? Ex. 21-49.
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Ex. 21-56 Economic reasons for changing accounting policies Discuss possible economic reasons why companies may choose to change accounting policies. *Ex. 21-57 Non-counterbalancing error correction Turkey Corp. bought a machine on January 3, 2015 for $275,000. It had a $15,000 estimated residual value and a ten-year life. The corporation uses straight-line depreciation. An.
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Ex. 20-111Calculation of lease amounts for lessor for Manufacturer/Dealer leases with guaranteed residual amount. Cow Co. is a farming equipment dealer who reports using IFRS. It plans to lease a piece of farming equipment to Horse Inc.and wants to earn a profit on the equipment as well as earn interest.The details.
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MULTIPLE CHOICE—Conceptual 1. The primary purpose of the statement of cash flows is to provide information a) about an entity’s operating, investing, and financing activities during a period. b) that is useful in assessing cash flow prospects. c) about an entity’s cash receipts and cash payments during a period. d) about an entity's ability to.
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Ex. 22-71 Calculations for statement of cash flows (indirect method) Cornwall Ltd. sold a machine that cost $19,000 and had a book value of $11,000 for $13,000. Data from the corporation's comparative statements of financial position are: Dec 31/17Dec 31/16 Machinery$200,000$173,000 Accumulated depreciation48,00034,000 Instructions Based on the above information, there are four items that need to.
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Ex. 22-68 Classification of cash flows (indirect method) Note that X in the following statement of cash flows identifies a dollar amount and the letters (A) through (F) identify specific items, which appear in the major sections of the statement of cash flows prepared using the indirect method. Cash flows from operating.
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PROBLEMS Pr. 20-121Lessee accounting—capital lease Long Ltd., a private corporation adhering to ASPE, enters into a non-cancellable lease agreement on July 1, 2017, to lease equipment from Fong Ltd. The following data are relevant to the lease agreement: 1.The term of the lease is 4 years, with no renewal option. Payments of $126,807.
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Ex. 21-52Retrospective application for accounting changes Discuss how retrospective application for accounting changes would be applied. Ex. 21-53 Recognition of accounting changes or corrections For each of the following items, indicate the type of accounting change and how each is recognized in the accounting records in the current year. 1.Change from straight-line method of.
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73.              On July 1, 2017, Nickel Ltd. leases equipment from Dime Corp., under an eight year capital (finance) lease. Equal annual payments of $100,000 are required, payable on July 1 of each year. The first payment is made on July 1, 2017. The appropriate rate of interest for this.
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Ex. 20-103 IFRS 16 additional disclosures A right-of-use or capital lease has similar disclosures as in the standards for long-term liabilities and some additional disclosures. What are the additional disclosures? Ex. 20-104 IFRS 16 disclosure requirements for non-capital leases What disclosures are required under IFRS 16 for leases that are exempt from right-of-use.
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Pr. 20-124Lessor accounting—lease with IFRS criteria On January 1, 2017, Regal Air Inc. enters into an eight year, non-cancellable lease agreement to lease an airplane to Atlantic Airlines, with payments required at the end of each year. The following information relates to this agreement: 1.Atlantic Airlines has the option to purchase the.
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Pr. 22-75 Preparation of statement of cash flows (direct method) White Horse Ltd. has prepared the following comparative statements of financial position at December 31, 2016 and 2017: White Horse adheres to ASPE. 20172016 Cash...........................................$  99,000$  51,000 Accounts receivable...............................53,00039,000 Inventory........................................50,00060,000 Prepaid expenses.................................6,0009,000 Property, plant & equipment.........................420,000350,000 Accumulated depreciation...........................(150,000)(125,000) Goodwill.........................................    51,000    58,000 $529,000$442,000 Accounts payable.................................$  51,000$  56,000 Accrued liabilities..................................20,00014,000 Mortgage payable.................................—150,000 Preferred shares..................................215,000— Common shares..................................200,000200,000 Retained earnings.................................   .
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Ex. 21-50 Matching disclosures to situations In the blank to the left of each statement, fill in the letter from the following list which best describes the treatment of the item on the financial statements of Sora Inc. for the current year ending December 31, 2017: a) Change in accounting policy requiring.
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Pr. 21-60 Error corrections and adjustments The controller for Stork Corp. is concerned about certain business transactions that the company experienced during 2017. The controller, after discussing these matters with various individuals, has come to you for advice. The transactions at issue are presented below: 1.The company has decided to switch from.
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Pr. 20-123 Lessee accounting – under IFRS 16 On January 1, 2017, Shrek Inc. enters into a seven-year non-cancellable lease with Fiona Ltd. For machinery having an estimated useful life of nine years and a fair value of $4,300,000.Shrek’s incremental borrowing rate is 8% and Fiona’s implicit rate is 6%.Shrek uses.
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36. The cash provided by investing activities in 2017 was a) $148,000. b) $198,000. c) $238,000. d) $308,000. 37. The cash provided by financing activities in 2017 was a) $136,000. b) $226,000. c) $286,000. d) $296,000. Use the following information for questions 38–39. Malcolm Corp.'s statements of financial position at December 31, 2017 and 2016 and information relating to 2017 activities.
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