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Multiple Choice—Computational 52. Mindy Corporation acquired all outstanding shares of Lahiri Ltd. For $4.2 million.Selected information relating to Lahiri was as follows: Fair value of identifiable net assets: $4.0 million Book value of identifiable net assets: $3.1 million Cash balance:$0.1 million Mindy will recognize goodwill of a) $0.2 million. b) $1.1 million. c) $4.1 million. d) $3.0 million. 53.At December.
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41.In announcing that the AASB would adopt IASB accounting standards by 1 January 2005, the Financial Reporting Council (FRC) argued that a single set of high-quality accounting standards that are accepted in international capital markets would greatly help cross-border comparisons by investors. 42.Under the ASIC Act 2001 one of the key.
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True/false questions 31.Items which have only sentimental or spiritual benefits are not assets for accounting purposes. 32.Constructive obligations are those that arise from legally binding contracts. 33.Under the Conceptual Framework, the settlement of a liability can be made in a number of ways, including by conversion of the obligation into equity. 34.The Conceptual.
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Ex. 12-77Journal entries for patent purchase CSI Products Ltd. purchased a patent on January 1, 2017, for $1,120,000.At the time of the purchase, the patent had a remaining legal life of 20 years.In January 2020, CSI spent $92,000 successfully defending the patent in court.One of the other results of the court.
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21.If the balance in a forfeited shares account is refundable to the owners of those shares, then the account is classified as a component of: a.revenue. b.liabilities. c.equity. d.expense. 22.The costs of issuing shares effectively: a.reduce the proceeds from the share issue. b.increase the proceeds from the share issue. c.are borne by the underwriters of the share issue. d.are.
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Ex. 12-75 Intangible assets theory It has been argued on the grounds of conservatism that all intangible assets should be written off immediately after acquisition. Discuss the accounting arguments against this treatment. Ex. 12-76 Terminology In the space provided at right, write the word or phrase that is defined or indicated. 1.In a business.
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21.In relation to a revaluation surplus, an entity: a.cannot use this surplus for the payment of future dividends. b.can transfer this surplus to retained earnings when the asset is derecognised or used. c.cannot transfer this surplus to any other reserve account. d.can transfer the surplus to the current period profit or loss when the.
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21.The cost of purchasing patent rights for a product that might otherwise have seriously competed with one of the purchaser's patented products should be a) expensed in the current period. b) amortized over the legal life of the purchased patent. c) added to factory overhead and allocated to production of the purchaser's product. d).
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11.Which of the following statements is correct in relation to the recognition of expenses? a.Under the Conceptual Framework, the recognition of expenses is based on the matching process. b.The recognition of expenses is not subject to the same degree of regulation as revenue. c.Under the Conceptual Framework, recognition of expenses is not.
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True/false questions 31.Members of a company are allowed to sell their shares at any time, provided they obtain permission from the other members. 32.Small proprietary companies must prepare audited accounts if requested by ASIC. 33.When determining whether a proprietary company is classified as small or large, the consolidated gross assets test is.
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31. Which of the following is correct regarding the rational entity impairment model? a) For limited-life intangibles, IFRS requires that the rational entity impairment model be applied. b) For limited-life intangibles, ASPE requires that the rational entity impairment model be applied. c) For indefinite-life intangibles, ASPE requires that the rational entity impairment model.
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Exercises Ex. 11-75 Componentization and depreciation of PP&E assets You are the accountant for a manufacturing company. You have just been advised of the acquisition of a new machine. You have received a memo which only gives you the following information: Grinding Equipment Model:XZ-1-1000 Cost:$1,250,000 Instructions To be able to properly account for this asset, list and.
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Exercises Ex. 12-73Intangible assets and goodwill Explain the three main characteristics of intangible assets.Is goodwill an intangible asset?Why, or why not?Explain. Ex. 12-74Calculating goodwill Explain how the amount to be recognized as goodwill can be calculated.Can goodwill be sold?If so, how?Explain. .
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11.The main role of the trustee for debenture holders is to protect the interests of: a.suppliers. b.debenture holders. c.directors. d.employees. 12.Which of the following is not specifically excluded from the definition of a debenture under s. 9 of the Corporations Act 2001? a.Bank overdrafts in the ordinary course of business. b.Unsecured notes. c.Money orders. d.Cheques. 13.Which of the following.
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Ex. 11-80Asset depreciation and disposition Answer each of the following questions. 1.On January 2, 2017, a machine was purchased for $180,000. It has an estimated useful life of ten years and an estimated residual value of $14,000. Depreciation for 2018, using the double declining-balance method, is $_____________. 2.A vehicle purchased for $50,000 has.
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11. Intangible assets that have a finite life are amortized over a period NOT to exceed a) intangible assets are not amortized. b) 0 years. c) their useful life. d) the legal life. 12. The reason that the revaluation model is NOT widely used for measuring intangible assets after initial recognition is that a) it is.
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Ex. 12-87Alternative treatments of goodwill after recognition Once goodwill has been recognized in the accounts there has been much disagreement over how it should be treated in subsequent periods. Discuss the alternative treatment approaches. Ex. 12-88Acquisition of tangible and intangible assets Abe Manufacturing Corp. decided to expand further by purchasing the net assets.
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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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41.Which of the following costs of goodwill should be capitalized? Costs of goodwill from a business combination accountedCosts of developing      for as a purchase        goodwill internally a)NoNo b)NoYes c) YesYes d) YesNo 42. The steps involved in testing goodwill for impairment using ASPE do NOT include a) comparing the current implied fair value of goodwill with its carrying.
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PROBLEMS Pr. 12-99Intangible assets The following transactions involving intangible assets of Falkland Corporation occurred on or near December 31, 2017. Complete the chart below by writing the journal entr(ies) needed at that date to record the transaction, and at December 31, 2018 to record any resultant amortization. If no entry is required.
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66.On January 1, 2009, Owl Corporation purchased equipmentfor $76,000, having a useful life of ten years and an estimated residual value of $4,000. Owl has recorded monthly depreciation using the straight-line method. On December 31, 2017, the equipment was sold for $14,000. The gain to be recognized from the sale.
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Ex. 12-79Journal entries for patent sale Amplify Inc. purchased a patent on September 1, 2017 for $41,080.At the time of purchase, Amplify estimated that the patent’s economic benefits would last until the end of 2021. Amplify’s fiscal yearend was December 31.On April 1, 2020, Amplify sold the patent to another company. Instructions a).
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Ex. 12-89Goodwill measurement and recording Snoopy Inc. is considering purchasing the net assets of Woodstock Corporation.Following is the statement of financial position of Snoopy as at December 31, 2017. SNOOPY INC. Statement of Financial Position As at December 31, 2017 Current assets $231,400 Buildings and equipment   753,000 Accumulated amortization (113,000) Land 173,000 Total Assets $1,044,400 Current liabilities $187,000 Common shares 577,000 Retained earnings 280,400 Total equities $1,044,400 Following are the fair values.
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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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*Ex. 11-77Calculatedepreciation and CCA Five identical vehicles which cost $500,000 (total) are acquired on April 1, 2017. Their estimated residual value is $20,000 and expected life is eight years. These assets are Class 10 with a maximum CCA rate of 30%. The company has a December 31 year end. Instructions Calculate the depreciation.
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Ex. 12-85Technology-based intangible assets Provide an example of a technology-based intangible asset.Over what period should these types of assets be amortized? Ex. 12-86Intangible asset impairment Picot Collective purchases a patent on January 1, 2012 for $118,800.At the time of purchase, Picot estimated that the patent had a useful life of 12 years.Picot used.
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41.If a company makes a renounceable rights issue, the shareholders are not allowed to sell their rights, but must either accept or reject the offer to purchase additional shares in the company. 42.Section 124 of the Corporations Act places a restriction on the private placement of shares, limiting to 15% of.
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Ex. 12-90Determining impairment loss under ASPE On September 1, 2017 Humble Corporation acquired Roots Media for a cash payment of $859,100.At the time of purchase, Roots’ statement of financial position showed assets of $899,600, liabilities of $462,300, and owner’s equity of $437,300.The fair value of Roots’ assets is estimated to be.
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Ex. 12-94Calculation of goodwill Great Corporation is interested in purchasing Big World Company Ltd.The total of Big World’s net income amounts over the last five years is $745,000.During one of those years, Big World reported a gain on discontinued operations of $93,000.The fair value of Big World’s net identifiable assets is.
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Pr. 12-100Journal entries for impairment of intangible assets Patagonia Corp., a large, privately held company is preparing its year-end entries. As senior accountant, you have been asked to prepare the entries related to the company's intangible assets. Patagonia currently carries the following intangible assets* on its balance sheet: Trade name$125,000net of accumulated amortization.
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Pr. 11-85Calculation of ratios Vulture Ltd. provides the following selected information for the calendar years 2020 and 2019: 20202019 Net revenues.....................................$320,000 Net income......................................    75,000 Accounts receivable...............................    33,000$26,000 Inventory........................................    61,000  55,000 Total assets......................................  210,000176,000 Total liabilities....................................    84,000  74,000 Instructions For 2020,calculate the following ratios to two decimals: a)Asset turnover ratio b)Profit margin ratio c)Rate of return on assets .
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MULTIPLE CHOICE—Conceptual 1.Which of the following is NOT generally true of intangible assets and goodwill? a) Many major public companies have significant amounts of intangible assets and goodwill listed on their balance sheets. b) The major assets of today’s information and service providers are likely to be tangible. c) The major assets of today’s.
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Pr. 11-84Cost recovery impairment model, revision of depreciation Rhino Corporation is a manufacturer of automobile parts. Its capital assets include specialized equipment that is being used in the finishing stage of its manufacturing process. The equipment was purchased in 2017 and is being depreciated using the units-of-production method. By December 31, 2018,.
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Multiple-choice questions 1.The advantages of a company over a partnership and sole trader do not include which of the following? a.Members are able to sell their shares at any time to another person without having to obtain permission from the other members. b.Members are liable for only a limited amount of the.
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Multiple-choice questions 1. In respect to the issue of shares by companies, which of the following statements is incorrect? a.Companies can convert ordinary shares into preference shares. b.Companies can only issue ordinary shares. c.Companies can issue any specified number of shares at any price. d.Companies can issue both ordinary and preference shares. 2. According to the.
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Ex. 12-92Reporting a patent purchase Comox Corporation has a December 31 fiscal year end.Comox purchased a patent from Courtney Inc. for $400,000 on January 1, 2014.The patent expires on January 1, 2022.Comox has been amortizing it over its legal life.During 2017, Comox determined that the patent’s economic benefits would not last.
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21.People cannot be appointed as members of the AASB unless: a.they are a member of one of the accounting professional bodies. b.they are a registered company auditor. c.their knowledge and experience in business, accounting, law or government qualifies them for appointment. d.they have experience as a company director. 22.According to s. 224 of the ASIC.
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*Ex. 12-96Calculation of goodwill Waikiki Corp. expects excess earnings of $48,000 for each of the next eight years. Assume half of the excess is earned at the end of each six months. Calculate the estimated goodwill if it is based on the present value of excess earnings discounted at 10%, compounded.
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Ex. 12-81Capitalization of R&D costs Carmanah Industries Ltd. Is a company in the high-technology industry. Carmanah has been working on developing a new solar panel technology. The technology meets all of the six criteria required in order to capitalize development costs.During 2017, Carmanah incurred the following costs related to research and.
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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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Multiple Choice—Computational 36.Consider an asset that was separated into its main components (A, B and C). The $1,200,000 purchase price was allocated to these components in equal proportions. The useful lives are 12, 4, and 7 years for components A, B and C respectively. Components A and B are not expected.
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PROBLEMS *Pr. 11-83Calculate depreciation and CCA On July 2, 2017, Vicuna Inc. purchased equipment for $720,000. This equipment has an estimated useful life of six years and an estimated residual value of $30,000. Depreciation is taken for the portion of the year the asset is used. The asset is a Class 8.
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Ex. 12-83Criteria for capitalization of development costs List the criteria that must be met before development costs of a project may be capitalized. Ex. 12-84 Definitions Provide clear, concise answers for the following: 1.What are intangible assets? 2.How are research costs accounted for? 3.How are development costs accounted for? 4.What are the two models that are used.
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Multiple-choice questions 1.According to the AASB’s Conceptual Framework an asset is defined as a/an: a. contingent item depending on another event occurs at some time in the future. b. resource controlled by the entity as a result of future events and from which future economic benefits are expected to flow to the entity. c..
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True/false questions 31.It is possible for a company to issue different types of preference shares provided that the rights of each type are specified in its constitution. 32.Prior to the allotment/issue of shares, the balance in the application account represents a liability of the company to the applicants. 33.If a company has.
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