Accounting Expert Answers & Study Resources : Page 264

26) Explain derecognition of property, plant or equipment. 27) What does a "gain on disposal of property, plant and equipment" mean? Does a gain suggest good or excellent management and a loss on disposal indicate poor management? Explain your conclusion. 28) Will the method of depreciation affect the net cash outflow associated.

21) What factor will not affect the estimated useful life of a definite lived intangible asset? A) Legal life of the asset. B) Productive capacity. C) Competitive pressures. D) Technological obsolescence. 22) What factor will not affect the estimated useful life of a definite lived intangible asset? A) Legal life of the asset. B) Technological obsolescence. C) Physical.

12) Steep Mountain Ski Resort has been granted a 20-year permit to develop and operate a snow skiing operation in a national park. After 20 years the site must be returned to its original condition. The roads may remain, as they can be used for fire prevention purposes. In the.

22) A machine was acquired on January 1, 2012 for $4,000,000. At that time it was estimated the machine would last eight years and have a residual value of $560,000. Due to reduced levels of activity during 2014, management revised the estimate of useful life to 10 more years (i.e.,.

31) Which statement is not correct? A) The three phases in mining activities are: mineral exploration, development and extraction. B) The accounting for mineral exploration is conceptually similar to that for research activities. C) Mineral exploration costs can be capitalized because markets for mineral resources are well established. D) A mineral site entering.

8) Victoria purchases a hotel with 100 similar rooms. To help finance this purchase, Victoria sells these rooms to individual investors for $200,000 each. An investor who owns a single room receives 55% of 1% of the revenue of the hotel (i.e., 0.55%), while the hotel retains the other 0.45%..

6) Every three years a major component (part #45) in a machine must be replaced. By doing this regular but expensive repair the machine can be used for 15 years. If Part #45 were not replaced, the machine could be used only for a maximum of six years. When the.

51) What factor(s) differentiate a held-to-maturity investment from a 'loan or receivable'? A) Whether the instrument is a debt, equity or derivative instrument. B) Whether the instrument has a set maturity date. C) The instrument does not trade in an active market. D) Whether fair value information is available for the instrument. 52) Fisher Corporation.

11) For each of the following financial asset classifications shown in the left column, identify the combinations of (i) the type of financial instrument in the middle column that can be put into that classification and (ii) the trading intent that would lead to that classification. 12) For financial reporting purposes,.

9.1   Multiple Choice Questions 1) Which of the following is not a characteristic of intangible assets? A) Intangibles do not have physical substance. B) Intangibles benefit more than one year. C) Intangibles have fixed determinable cash flows. D) Intangibles are held for use in the ordinary course of business. 2) Which of the following is a.

4) The following transactions occurred in fiscal 2011: •Synthesize Inc. exchanged machinery with Energize Corp. Synthesize's machinery Energize's machinery Cost 500,000 620,000 Accumulated depreciation 200,000 500,000 Fair value 350,000 Not known •Synthesize Inc. purchased equipment by signing a 5 year non-interest bearing note payable for $200,000. The implicit rate of interest was 5%. •Synthesize received a government grant of $10,000 to help purchase the.

2) Super Control Group has the following investments: Transactions Net income of Investee for calendar 2012 Fair value at Dec 31, 2012 XYZ Corp • Purchased all of the outstanding shares on Mar 31 for $1,500,000. $1,000,000 $1,150,000 VWX Inc. • Purchased 80% for $1,000,000 Acquired joint control over the strategic, operating and investing decisions on January 1. 200,000 175,000 ABC Inc • Purchased.

2) Grape Company (GC) had been renting its office building for several years. On January 1, 2013, GC decided to have a new office building constructed. On that date, it acquired land with an abandoned warehouse on it for $350,000. Other costs included the following: Demolition of warehouse $18,000 Legal fees for.

14) Classify each of the following items into one of the seven categories of financial assets relevant for financial reporting purposes. Select the category that best suits the situation given. 15) Classify each of the following items into one of the seven categories of financial assets relevant for financial reporting purposes..

5) On March 31, 2011, a machine costing $3,000,000 was acquired. The company estimates that the asset will have an estimated useful life of five years and a residual value of $450,000. On April 1, 2016, the asset is sold for $550,000. The company uses straight-line depreciation. The company has.

31) Polar Sky Railway (PSR), a transportation company, has substantial investments in property, plant, and equipment. In 2011, the company exchanged some of these assets with other companies. [Note: any depreciation expense prior to the following transaction has already been properly recorded.] PSR is trying to expand its business in.

41) Scandsia Ltd. owns a machine that it purchased on Jan 1, 2010 for $750,000. The machine had an estimated useful life of 5 years and an estimated residual value of $50,000. The company uses straight-line depreciation and records monthly depreciation. The machine was sold on December 31, 2013 for.

32) Willow Corp. is a real estate developer with its headquarters in Burlington, Ontario. As a result of recent increases in land prices, Willow has accumulated a substantial amount of excess cash. It is looking to invest in a building supply company, but has not yet found a suitable company. To.

24) A large lathe was bought on January 1, 2013 for $15,000,000. It was expected to last for 12 years and have a residual value of $300,000. The company uses straight-line depreciation. At the beginning of 2018, the remaining useful life of the lathe was revised to be four more.

22) Invest Up Hardware operates a chain of hardware stores. Recent operations have been stable and profitable, resulting in a significant amount of cash inflows. During the past fiscal year ended December 31, the company made a number of investments, as described below. a.Invest Up bought 30,000 shares of Machine Mart,.

34) Wind Town is a builder of wind turbines that arc used in electricity generation. To encourage the installation of wind turbines and the development of wind power technology, the provincial government has several programs in place that support the industry. In 2012, Wind Town incurred the following costs that.

71) Mathew Corp exchanged similar assets with Simone Company in a transaction with commercial substance. Mathew gave up equipment that had a net book value of $47,000 (fair value $49,000) and Simone exchanged equipment with a net book value of $36,000 (fair value $35,000). What is the correct value at.

19) Listed below are several long-lived assets owned by X Corp. The company uses straight-line depreciation. Assume in all cases that the asset's first and last years are full years, and that all assumptions and estimates used to derive depreciation remain unchanged throughout the assets' useful lives.     Requirement: For each asset, calculate.

17) Accounting standards provide for a variety of different measurement bases for different types of financial assets. IFRS has six measurement bases, namely: •consolidation •fair value with changes through income •proportionate consolidation •fair value with changes through other comprehensive income •equity method •amortized cost Required: a. Explain why reporting entities should, on the one hand, use consolidation, proportionate.

11) What costs should not be capitalized to 'equipment'? A) Non-refundable sales tax. B) Equipment purchase cost. C) Abnormal waste in testing. D) Equipment specific training. 12) How should $45,000 spent to obtain greater productive efficiency for a machine with a carrying value of $80,000 be accounted for? A) Capitalized, then depreciated during current and subsequent.

61) Mirvish Limited invests in short term investments. The following information is available about its investments at December 31, 2012: Cost Market Investment 1 $40,000 $36,000 Investment 2 30,000 26,000 If Mirvish accounts for these as available-for-sale investments, what entry is necessary for fiscal 2012? A) A loss of $8,000 to net income B) A gain.

16) Explain how the depreciation method should be selected for property, plant and equipment. 17) Explain the accounting purpose of 'depreciation.' Does depreciation represent the decline in value of an asset? 18) At December 31, 2012, the following data were available for a building owned by Omega Company: Building cost $700,000 Accumulated depreciation - building 525,000 Estimated.

35) A bond has a maturity value of $750,000 payable in 3 years. These bonds have a 5% coupon rate payable annually, and the market yield was 2% when the bonds were purchased. Requirements: a. Is this a discount bond or a premium bond? b. Compute the amount required to purchase this bond.

21) What is the meaning of 'residual value'? A) The estimated amount that an entity would currently obtain from disposal of the asset, after deducting disposal costs, for an asset of similar age and condition expected at the end of its useful life. B) The total amount to be expensed through depreciation. C).

9) A large piece of earth-moving equipment was upgraded at a cost of $440,000 so that it could self-unload. After the upgrade was completed, management estimated that this feature would save the company $40,000 a year for the next six years. Prepare the necessary journal entry to record the transaction. Provide.

61) What is the effect of overstating 2012 depreciation expense? A) Accumulated depreciation will be understated for 2012. B) Net income for 2012 will be overstated. C) Ending retained earnings for 2012 will be understated. D) Ending retained earnings for 2012 will be overstated. 62) When is property, plant and equipment (PPE) not derecognized? A) When.

13) Forest Company paid $38,000,000 for a warehouse and related assets from a company that was in bankruptcy. The warehouse includes land, building, moving equipment, and heating /ventilation/air conditioning (HVAC) system. An independent appraiser valued these items individually as follows:   Requirement: Allocate the purchase price among the assets acquired. 14) Office Plus Company.

38) On January 1, 2011, Cadance Company purchased bonds with a maturity value of $100,000 for $80,747. These bonds have a 12% coupon rate payable semi-annually on June 30 and December 31. The bond matures on December 31, 2015. On January 1, 2011, the market yield for bonds of equivalent.

51) FeelGood Corp. purchased equipment on January 1, 2011 for $275,000. It was estimated that the equipment would have a residual value of $25,000 at the end of its useful life. The asset's useful life was estimated at 5 years or 10,000 units of output. The company has a December.

31) What is the meaning of 'entry value'? A) The cost required to replace the productive capacity of an asset. B) The value of an asset in an input market or output market on the date of measurement. C) The value expected from the sale of an asset, net of any costs of.

4) Daniel Manufacturing Limited (DML) purchased a large lathe. The invoice cost of the lathe was $6,200,000 but DML was able to get the price reduced to $5,800,000. The seller provided terms whereby if the entire amount was paid within 30 days a further discount of 3% was available. DML.

8.3   Comprehensive Problems 1) Growth Industries incurred the following costs in fiscal 2011: Land and building   Land purchase $3,000,000 Dismantling of old building 50,000 Proceeds from selling parts of old building 10,000 Building materials, labour for construction of new building 2,000,000 Roof of new building 750,000 Heating and air conditioning system for new building 500,000 Directly attributable overhead during construction of new building 100,000 General and.

30) On January 1, 2011, Anny Marine Supplies purchased a Government of Canada bond at par for $12,000. The bond has an interest rate of 7% and matures in three years. By December 31, 2011, market interest rates had increased such that the fair value of the bond decreased to.

27) Discuss three factors that are important in classifying an investment as a 'loan or receivable.' 28) On January 25, 2011, Harper Ltd. purchased 2,500 common shares of RBC (Royal Bank of Canada) for $10 each. During the remainder of 2011, Harper received $2.75 per share in dividends and RBC's earnings.

4) Koala had the following transactions relating to its investments during 2013. Koala uses the effective interest method of amortization of premiums or discounts when applicable. a.On July 1, 2013, Koala acquired a $400,000, 16%, 8-year government bond with interest paid semi-annually on January 1 and July 1. Because the market.

7.3   Comprehensive Problems 1) Bountiful Corporation has the following investment portfolio at December 31, 2012: Management intentions Transactions Fair value @ Dec 31, 2012 Shares in Sherman Inc. Intend to trade frequently •Purchased 1,500 shares on Mar 31 for $1,500,000. •Purchased 50 shares for $60,000. •Dividends of $50/share were received on July 18. •Sold 10 shares on Sept 1 for.

8.1   Multiple Choice Questions 1) Which of the following is a not characteristic of property, plant and equipment (PPE)? A) PPE are tangible items. B) PPE benefit more than one year. C) PPE are held for use in the ordinary course of business. D) PPE have fixed and determinable future cash flows. 2) What costs should.

11) Which statement is not correct? A) Goodwill represents the difference between the purchase price and the fair value of net assets acquired. B) Fair value is the amount at which an item could be sold in an arm's length transaction. C) Economic goodwill differs from accounting goodwill and can be created by.

7.2   Problems 1) Explain why there is no one single measurement basis that is suitable for all financial assets. Does this mean that a company can choose any measurement base for any investment? 2) Explain what financial assets are, how they differ from other types of assets, and why there is a.

4) Identify whether each of the following items is a financial asset: 5) Describe the single most important characteristic of a financial asset that distinguishes it from a real asset. 6) Explain the characteristics of a financial asset. Discuss if cash has the characteristics of a financial asset. Why is (or is.

19) On January 1, 2013, Ella Ltd. purchased 25% of the common shares of JB Inc. for $2,200,000. In 2013, JB reported net income of $280,000 and paid dividends of $100,000. Requirements: a. Which of the following conditions must be met for Ella to use the equity method to report its investment.

71) Fiesta Corp purchases a $500,000 face value bond which matures in two years. The coupon rate is 6% and the market rate is 7%. How much premium or discount will be amortized in the first year? A) $4,367.24 B) $9,039.40 C) $30,000.00 D) $34,367.24 72) Simply purchases a $200,000 face value bond which matures.

8.2   Problems 1) Explain what costs should be capitalized to property, plant and equipment. Include a discussion of costs incurred for acquired assets, self constructed assets and repairs. 2) Explain why it is necessary to separate property, plant and equipment (PPE) items into separate components. 3) Using the conceptual framework, explain why there.

7) Aye Corp acquired land and a building on June 1, 2011 for $13,000,000. An expert in real estate appraisal estimates that the land is worth 40% of the total purchase price. The building is estimated to have a useful life of 25 years and a residual value of $450,000..

41) Which statement is correct about a held-for-trading investment? A) The investment is recorded at fair value. B) Changes in fair value are recorded in OCI. C) The investment is recorded at amortized cost. D) The category cannot include debt instruments. 42) Fisher Corporation has the following investments at September 30, 2012: Historical cost Fair value Sept 30,.