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Ex. 10-76Asset exchange with commercial substance In 2018, Malawi Inc. exchanged equipment for two delivery trucks. The equipment had been purchased for $95,000 ten years ago and has since been fully depreciated. While the equipment was recently appraised at $22,000, a reliable valuation for the trucks was not available. This transaction.
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Ex. 10-80Acquisition Cost RwandaCorporation purchased land at a cost of $100,000. Closing costs were $3,800, plus Rwandapaid $48,000 for site preparation so they could construct a building on the site. Instructions Calculate the amount that should be recorded as the cost of the land. Ex. 10-81Costs included in assets EritreaLtd. is expanding its operations. Due.
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Pr. 10-88Asset exchange – no commercial substance Turkey Corp. has a computer that they purchased on March 30, 2013for $106,000. This computer had an estimated life of ten years and a residual value of $6,000. On December 31, 2017, the old computer is exchanged for a similar computer with a fair.
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21.Which of the following is NOTlikely to be an indicator of possible asset impairment? a) evidence of obsolescence or physical damage b) a significant decrease in the asset's market value c) the book value of the entity’s net assets is greater than the entity’s market capitalization d) costs incurred for asset acquisition or construction.
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21.Under the fair value through net income model, holding gains are a) recognized in other comprehensive income only. b) recognized in either net income or other comprehensive income. c) recognized in net income only. d) ignored. 22.The fair value through net income model requires that a) investments are measured at fair value. b) transaction costs are expensed. c).
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MULTIPLE CHOICE—Conceptual 1.Which of the following is NOT a debt security? a) convertible bonds b) commercial paper c) loans receivable d) governmenttreasury bills 2.An investment in an entity's debt instruments makes that investor a(n) a) owner of the issuing entity. b) creditor of the issuing entity. c) parent company. d) subsidiary. 3.Which of the following is NOT an equity instrument? a) common.
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PROBLEMS Pr. 9-117Accounting for bonds – amortized cost model (IFRS) On January 1, 2017, on their issue date, Diogenes Inc. purchased 9%, $200,000, 10-year bonds. Interest is paid annually on December 31. Diogenes uses the amortized cost model and the effective-interest method for amortizing premium or discount. The current market rate was.
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Ex. 9-106fair value through net income method On October 1, Whiteside Ltd purchased 7% bonds with a face value of $1,000 for trading purposes, accounting for the investment at fair value through net income.The bonds were priced at 1.023 to yield Whiteside 5%, and pay interest annually each October 1.Whiteside has.
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Exercises Ex. 9-98 Motivation for investments List three reasons why an organization would make investments. Ex. 9-99Types of companies that have investments Consider the financial statements of a publishing house, a reinsurance provider and a charitable foundation.What types and proportions of investmnets would you expect to find on the financial statements of these companies? .
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Ex. 9-109Incurred loss, expected loss, and impairment Tyne Corporation owns corporate bonds at December 31, 2017, accounted for using the amortized cost model.These bonds have a par value of $864,000 and an amortized cost of $851,000.After an impairtment review was triggered, Tyne determined that the discounted impaired cash flows are $796,500.
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11.When a closely held corporation issues preferred shares for land, the land should be recorded at the a) total value of the shares issued. b) total book value of the shares issued. c) total liquidating value of the shares issued. d) fair market value of the land. 12.When an enterprise is the recipient of a.
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Pr. 8-178Retail inventory method California Corp. is preparing the financial statements at its fiscal year end, January 31, 2018. The following information is available: At CostAt Retail Inventory, February 1, 2017...........$83,400$  103,400 Markdowns........................47,000 Markups...........................71,000 Markdown cancellations..............22,000 Markup cancellations................9,000 Purchases.........................241,200294,300 Sales.............................329,000 Purchases returns and allowances......5,1506,700 Sales returns and allowances..........9,000 Instructions Calculate the ending inventory at cost at January 31, 2018, using the retail method.
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Pr. 10-95Asset overhaul Swift Corporation is an international provider of freight services that follows IFRS. Its fleet of vehicles includes a truck that is carried in its books as "VC1-016." This truck was purchased two years ago for $150,000 and has been depreciated on a straight-line basis. By December 31, 2017,.
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Pr. 9-124Equity method – IFRS Capricorn Corporation decided to purchase 35% of the outstanding shares of Aquarius Ltd. Capricorn’s CFO conducted an extensive evaluation of the financial statements of Aquarius and reported his findings to the board of directors in the following memo: Dear Board of Directors, Following your request, I conducted a.
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Ex. 10-78Non-monetary transaction without commercial substance Malawi Auto traded one of its used trailers (cost $40,000, accumulated depreciation $36,000) for another used trailer with a fair value of $6,400. Malawi also paid $600 to complete the transaction. Instructions Assuming the transaction lacks commercial substance, prepare the journal entry to record the exchange. Ex. 10-79.
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Pr. 10-90Non-monetary exchange Athens Inc. exchanged machinery with an appraised value of $1,170,000, a recorded cost of $1,800,000 and accumulated depreciation of $900,000, for machinery that Sparta Corp. owns. Sparta’s machinery has an appraised value of $1,140,000, a recorded cost of $2,160,000, and accumulated depreciation of $1,188,000. Sparta also gave Athens.
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31. Which of the following statements is correct? a) IFRS treats major overhauls that allow the continued use of an asset, as replacements; ASPE treats them as expenses. b) ASPE treats major overhauls that allow the continued use of an asset, as replacements; IFRS treats them as expenses. c) Both IFRS and ASPE.
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11.Under the cost/amortized cost model, holding gains are a) recognized in net income only when realized. b) recognized in other comprehensive income. c) recognized depending on management's intention. d) not recognized at all. 12.Equity investments that are accounted for under the cost model will result in a) recognition of dividend income only when actually received. b) expensing.
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Pr. 10-97Capitalization of borrowing costs Early in 2017, Qatar Corporation engaged Emirate Ltd. to design and construct a complete modernization of Qatar’s manufacturing facility. Construction began on June 1, 2017 and was completed on December 31, 2017. Qatar made the following payments to Emirate Ltd. during 2017: Date  Payment June 1, 2017$3,300,000 August 31,.
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31. The fair value through other comprehensive income (FV–OCI) model is sometimes referred to as a) the fair value through profit or loss (FVTPL). b) held for trading. c) discontinued operations. d) available for sale. 32. Salmon Corporation purchased an investment in 2017 (an equity investment without significant influence). The purchase price of $94,000 included.
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Ex. 9-115 Hanuman Corp is a medium sized corporation who has long dominated their market.With a strong cash-flow position, they have decided to invest excess cash strategically.In particular, Hanuman made periodic investments with their main supplier, Shiva.Although Hanuman currently owns 18% of the common shares of Shiva, it does not yet.
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Ex. 9-108Fair Value through other comprehensive income investments – entries Lekan Corp provided you with the following information about its investment in AdoweyeInc shares purchased May 2017 and accounted for using the FV–OCI method Cost$29,500 Fair value, December 31, 2017$30,900 Fair value, December 31, 2018$23,800 Fair value, December 31, 2019$26,900 Instructions a)Prepare the adjusting journal entries needed.
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Ex. 9-113 Investment in equity securities On January 1, 2017, Sally Corp. acquired 30% of Wally Ltd.’s common shares for $500,000. At that time, Wally had 1 million no par common shares issued and outstanding. During 2017, Wally paid total cash dividends of $220,000, and later declared and issued a 5%.
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Pr. 9-123Equity method (ASPE) On January 1, 2013, Titanic Corp. bought 30,000 shares of the available 100,000 common shares of IcebergInc., a publicly traded firm. This acquisition provided Titanic with significant influence. Titanic paid $700,000 cash for the investment. At the time of the acquisition, Icebergreported assets of $2,500,000 and liabilities.
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21.Under IFRS, biological assets should normally be measured at a) cost. b) cost less accumulated depreciation. c) fair value. d) fair value less costs to sell. 22.Land was purchased to be used as the site for the construction of a plant. A building on the property was sold and removed by the buyer so that.
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60.Nigeria Ltd. acquires a new machine. It is comprised of two different components (A and B) that are expected to be overhauled at different times. The acquisition costs of the machine are as follows: Component A:   $198,000 Component B:   $240,000 Component A is expected to have a useful life of 5 years and a.
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MULTIPLE CHOICE—Conceptual 1.              Which of the following is NOT included in the IAS16 definition of property, plant, and equipment (PPE)? a) PPE will be used over more than one accounting period. b) PPE is held for use in the production of goods and services. c) PPE can be tangible or intangible. d) PPE is tangible. 2.             .
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Ex. 9-111 Charles Inc. purchased 30% of Nassar Corporation’s 29,000 outstanding common shares at a cost of $15 per share on January 3, 2017.The purchase price of $15 per share was based solely on the book value of Nassar’s net assets.On September 21, Nassar declared and paid a cash dividend of.
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Multiple Choice—Computational 65.On August 1, 2017, Harley Inc. acquired $180,000 (face value) 10% bonds of Davidson Corporation at 104 plus accrued interest. The bonds were dated May 1, 2017, and mature on April 30, 2020, with interest payable each October 31 and April 30. The bonds will be held to maturity..
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Ex. 10-86Capitalization of interest On March 1, Dubai Corp. began construction of a small building. The following expenditures were incurred for construction: Mar 1$  75,000Jun 1$300,000 Apr 184,000Jul 1100,000 May 1180,000 The building was completed and occupied on July 1. To help pay for construction, $60,000 was borrowed on March 1 on a 10%, three-year.
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Pr. 10-93Revaluation model Mongolia Inc. owns equipment that it purchased on January 1, 2018 for $4 Million. The following additional information is available: Dec31, 2018– Book value (after recording 2018 depreciation): $3,600,000 Dec31, 2018– Fair value: $4,100,000 The company uses the revaluation model (asset adjustment method) to account for its property, plant and equipment. Instructions Assuming the.
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MULTIPLE CHOICE—Conceptual 1.Which of the following is INCORRECTregarding depreciation? a) It is not a matter of valuation. b) It is part of the matching of revenues and expenses. c) It is a means of cost allocation. d) It is an attempt to reflect the fair market values of the related assets. 2.Factors to consider in the.
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51.When one corporation has control over another corporation, the investor corporation a) is referred to as an associate. b) is referred to as the subsidiary. c) can determine the investee’s strategic operating and financing policies. d) must have obtained at least 50% of the investee’s issued common shares. 52.An investor who has subsidiaries a) is required.
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11.Which of the following is NOT a time-based depreciation method? a) straight-line b) units of production c) double-declining balance d) any diminishing balance method 12.Which of the following does NOT apply to the declining-balance method? a) It results in a decreasing charge to depreciation expense. b) Residual value is not deducted in calculating the depreciation base. c) The.
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Pr. 9-121Accounting for investments – FV–NI On December 31, 2017, Hubble Corp. has the following securities in its portfolio of temporary investments:   Cost  Market 5,000 common shares of Orion Corp.$ 80,000$ 69,500 10,000 common shares of Rigel Ltd.  91,000  92,500 $171,000$162,000 All of the securities had been purchased in 2017. In 2018, Hubble completed the.
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Ex. 9-104 Investments in debt securities Presented below are unrelated cases involving investments in debt securities: Case 1: A company owns another firm's debt securities in the form of bonds. The bonds were acquired at a discount and are accounted for under the amortized cost model. Case 2: An investment in notes receivable that had.
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Pr. 9-119Year-end adjustments for temporary investments Mercury Corp. has the following portfolio of common shares (without significant influence) at December 31, 2017: Investment CostFair value Albania Inc.$480,000$570,000 Bulgaria Ltd.90,000620,000 Czech Corp.   120,000  220,000 Total$690,000$1,410,000 Instructions Provide the entry to record the year-end adjustment for these investments, assuming Mercury uses one control account and has adopted the FV–NI model. Pr..
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Multiple Choice—Computational 40.Zambia Ltd.boughta lift truck with a list price of $40,000. The dealer granteda 15% reduction in the list price, and an additional 2% cash discount on the net price whenpayment was made in 30 days. Provincial sales tax was $2,380 and Zambia paidan extra $500 to have a special.
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Pr. 10-91Purchase of asset by non-interest bearing note Lebanon Corporation is a Calgary-based manufacturer of automobile parts. In early January 2017, the company acquired land and a building to be used as the company's new head office. Lebanon issued a $2M, five-year non-interest bearing note to the seller. Payment is to.
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Exercises Ex. 10-74Componentization Explain the concept of componentization as it applies to the recognition of PP&E assets. *Ex. 10-75Plant asset accounting During 2017 and 2018, Mauritius Corporation experienced several transactions involving plant assets. A number of errors were made in recording some of these transactions. For each item listed below, indicate the effect of.
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Ex. 9-100Types of companies that have investments Two types of companies that carry significant amounts of investments are banks and pension plans.Explain how these companies use their investment holdings to add value for their customers. Ex. 9-101Application of cost/amortized cost method Luke Corporation purchased $60,400 of 6-year, 7% bonds of Reed Inc. for.
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PROBLEMS Pr. 10-87Asset exchanges Bahrain Corporation follows a policy of a 10% depreciation charge per year on machinery and a 5% depreciation charge per year on buildings. The following transactions occurred in 2017: March 31, 2017A warehouse which Bahrain had purchased on January 1, 2008 for $1.7 million (with a current fair value of.
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Ex. 9-116 In early January 2017, Janus Inc., a private enterprise that applies ASPE, purchased 40% of the common shares of Keqing Corp. for $484,000.Janus was now able to exercise considerable influence in decisions made by Keqing’s management.Keqing Corp.’s statement of financial position reported the following information at the date of.
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Ex. 10-82Application of the revaluation model Aden Motels Inc. owns a motel that it had purchased on January 1, 2017 for $1.5 Million cashand is accounted for in a separate account, classified as "Structures." The company is using the revaluation model to account for its structures and revalues them annually. Aden.
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Ex. 10-84Application of the fair value model On January 20, 2018, Trail Corp. purchased a luxury apartment complex in British Columbia for $10 Million cash. In addition to the purchase price, Trail paid transfer fees of $150,000, and legal fees of $20,000. Wages paid to maintenance staff during each of the following.
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