Fusters, Inc. issues audited financial statements to its creditors and is required to maintain certain covenants based
Question:
1. Depreciation expense on the building for the year was $45,000. Because the building was increasing in value during the year, the controller decided not to record any depreciation expense in the current year.
2. New legislation was discussed by the government that would require new pollution control technology for companies such as Fusters. Prior to this, Fusters had been complying with all current requirements and otherwise believed that it was acting in an environmentally responsible manner. In anticipation of this legislation being passed next year, Fusters expects it will need to upgrade its equipment and has booked the following entry:
Equipment ...........21,000
Accounts Payable........... 21,000
3. During the year, the company sold certain equipment for $285,000, recognizing a gain of $69,000. Because the controller believed that new equipment would be needed in the near future, the controller decided to defer the gain and amortize it over the life of the new equipment that would soon be purchased.
4. An order for $61,500 has been received from a customer on January 2, 2014, for products on hand. This order was shipped f.o.b. shipping point on January 9, 2014. The company made the following entry in 2013:
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Instructions
(a) Discuss the reporting objectives of the users of Fusters' financial statements. 61,500
(b) Comment on the appropriateness of Fusters, Inc.'s accounting procedures and their impact on the company's financial statement users. Use the current conceptual framework (as opposed to the proposed conceptual framework).
(c) Discuss whether there are alternatives available under IFRS to provide the reporting desired by Fusters' management.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Step by Step Answer:
a It should be noted that the users are sensitive to Fusters debt equity and asset amounts since they are used to calculate debt covenant requirements If these amounts are not appropriately recognized ...View the full answer
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Related Book For 
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,
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