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business
intermediate accounting volume 2
Questions and Answers of
Intermediate Accounting Volume 2
Scenario A Crayoli Inc. is a publicly traded company. During the year, one of the bigger investors contributed land that was purchased by the investor for $800,000 in exchange for 40,000 common
Refer to the facts of A14-28.Data From Assignment14-28Clean Energy Ltd. began 20X2 with shareholders’ equity as follows:The company’s tax rate is 40%. In 20X2, the company reported transactions
Boxwood Corp. had the following transactions for the year ended March 20X6:1. A cash dividend of $217,000 was declared and paid.2. 70,000 additional common shares were issued in exchange for a
Zu Corp. has the following items in shareholders’ equity at 31 December 20X8:The following transactions and events happened in 20X9, in chronological order:a. A cash dividend of $38,000 was
The following transactions may change an account in shareholders’ equity in some way:a. Declare and issue a 2-for-1 stock split.b. Record donated building.c. Acquire treasury shares.d. Record a
Howard Corp. is a publicly owned company whose shares are traded on the TSX. At 31 December 20X4, Howard had unlimited shares of no-par-value common shares authorized, of which 15,000,000 shares were
Robinson Industries reported the following statement of shareholders’ equity for the year ended 31 December 20X7:Required:1. What is the nature of AOCI? Where does it appear in the financial
Below is a partially completed statement of changes in equity for Torino Capital Ltd. (in thousands of dollars).Required:Complete the statement of changes in equity to reflect the transactions and
The following statement of changes in shareholders’ equity summarizes various equity transactions that occurred during 20X2:Required:Journalize the transactions in the statement of shareholders’
On 1 January 20X0, Reez reported the following in shareholders’ equity:The following transactions occurred during the year and have not yet been accounted for (in the order presented):1. Recorded
During 20X7, Greens Ltd. reported the following:a. FVOCI investments with a recorded fair value of $455,000 were sold for $500,500. The original cost of these investments had been $200,000 in 20X5.
Tunito Corp., a public corporation, purchased equipment on 1 March and on the same day arranged for the supplier to begin customizing the equipment to meet Tunito Corp.’s specific needs. A payment
Jerrow Corp. has recorded $520,000 of total interest expense from $9,500,000 of general borrowing, which consists of short-term bank debt of $1,500,000 and an $8,000,000 bond payable. Other financing
Use the facts from TR13-5.Data From TR13-5Cumming Corp. issues a $6,000,000, 5% bond on 1 April 20X3. At this time, market interest rates are in the range of 6%. The bond had a 10-year life from 1
Refer again to the data in A17-6.Data From A17-6Tyler Toys Ltd. reported the following:Required:1. Provide the journal entry to record the benefit of the tax loss in 20X5, assuming that the tax loss
Moon Ltd. reported the following:Required:1. What is the amount of the taxable income or loss in each year?2. How much is the tax refund to be claimed in 20X8?3. What is the amount of the loss
Jupiter Ltd. reported the following:Required:1. What is the amount of the taxable income or loss in each year? What is the amount of the loss carryforward at the end of 20X8?2. Prepare a journal
Saturn Ltd. began operations in 20X3. For the first six years of operations, the company had the following pre-tax net earnings (loss):There have been no temporary differences between pre-tax
Remnant Inc. is a public company that reports under IFRS and has a 31 December year-end. Over the past three years the company has reported taxable income and paid taxes as follows:At the end of
Senior Home Living (SHL) is a Canadian-based corporation located in British Columbia. SHL provides senior living residences across Canada. The company was incorporated in 1975, and has been
Melinda Ltd. had a gross $100,000 loss carryforward at the end of 20X6. This gross loss carryforward increased to $140,000 at the end of 20X7. In 20X8, $50,000 of the LCF was used. The enacted tax
Mercury Ltd. reported earnings of $75,000 in 20X9. The company has $55,000 of depreciation expense this year, and claimed CCA of $90,000. The tax rate was 25%. At the end of 20X8, there was a $10,000
Sol Ltd. reported earnings of $400,000 in 20X8. The company has $80,000 of depreciation expense this year, and claimed CCA of $120,000. The tax rate was 28%. At the end of 20X7, there was a $100,000
Premium Blinds Ltd. specializes in the manufacture of custom and pre-finished blinds and drapes for windows and doors. The firm was founded by Bill Khadim, who retired 10 years ago and now lives in
The following data is related to Cold Brook Resources Ltd.:During the year, the following transactions took place:a. Earnings were $2,600,000.b. Cash dividends were paid.c. The common share
Signs and Designs Inc. (SDI) is a company operating in the advertising industry. SDL provides companies with designs for new signage and company logos. The company has a profit-sharing plan whereby
Information has been gathered for two contracts:Contract A Cell Talk Corp (CTC) recently entered into a two-year contract with a local shopping mall to set up a cell phone kiosk. For the
Softle Corporation is a privately owned corporation that sells exercise equipment. During the year, the company entered into a strategic partnership with an entrepreneur looking to work with a bigger
Abolique has recently gone through the process of issuing common shares. The following costs were incurred during the year:• Underwriting fees: $15,000• Professional fees (accounting and legal):
Globile Corporate is a public corporation listed on the Toronto Stock Exchange. The company has three classes of shares, as follows:• Common shares (no par-value, unlimited authorized)• Series A
Jenga Services Ltd. is a Canadian public company that owns a variety of online media platforms.While each platform varies, the mission of Jenga is to publish relevant news content that addresses
Value Production Corp. currently has a debt to equity ratio of 3.2-to-1, based on $16 million of debt and $5 million of equity. The company is looking to raise $2 million in new financing for an
Canada Resources Ltd. issued a 14-year, $15,000,000 debenture with an interest rate of 5%; cash interest is paid semi-annually. The market rate of interest for debt of similar size, risk, and term is
Twixt Corp. issued $5,000,000 of convertible bonds on 1 January for $4,790,000 cash. The bond had the following terms:• Bonds mature in five years’ time.• Annual interest, 5%, is paid each 31
Rebelcork Minerals is a publicly traded company listed on the Toronto Stock Exchange. On 1 January 20X4, the company granted 40,000 stock options to 50 of its employees. Relevant information about
Listed below are six independent sources of deferred income tax. For each item, indicate whether the deferred income tax account from this source alone would be a debit or a credit. Item a.
Renat Mehali is a junior accountant, working in the same group as you at your public accounting firm, P&A Partners. Renat looks up to you and often turns to you for guidance and mentorship. Renat
Fellows Inc. started operations on 1 January 20X8 and purchased $2,000,000 of equipment. The income tax rate was 40% in 20X8 and 38% in 20X9. The following is information related to 20X8 and
The records of Samuel Corp. provided the following data at the end of years 1 through 4 relating to income tax allocation:The above amounts include only one temporary difference; no other changes
Dauphinee DL Corp. plans to purchase 100,000 shares of Santos Technology Ltd., a publicly traded company. Dauphinee has signed a contract to acquire the shares from Holding Co. in 90 days, after
The records of Boomer Corp., in its first year of operation, at the end of 20X8, provided the following data related to income taxes:a. Golf club dues expense in 20X8, $10,000, properly recorded for
Lin Ltd. reported the following:Required:1. What is the amount of the taxable income or loss in each year?2. How much is the tax refund to be claimed in 20X8?3. How much is tax expense (recovery) in
Penguin Corp. reported accounting earnings before taxes as follows: 20X6, $675,000; 20X7, $57,000. Taxable income for each year would have been the same as pre-tax accounting income except for the
Cell Image Corp. reported a deferred tax liability of $120,000 in 20X5, caused by equipment with a UCC of $1,500,000 and net book value of $1,980,000. The tax rate was 25%. In 20X6, accounting
Compass Direction Ltd. has constructed a warehouse facility, paying $560,000 for land on 1 February 20X2, $500,000 to a contractor in late March 20X2, another $2,000,000 in late August 20X2, and
Early in 20X1, Nitro Demolition Ltd. borrowed money to partially finance the acquisition of a bulldozer. The loan was a five-year, $90,000 loan, secured by a first charge on the bulldozer and the
Xing Corp. has a 31 December year-end and adopts IFRS for financial reporting.The following data relate to bonds issued by Xing Corp:• Bond issue date: 1 January 20X6• Total face value:
The following cases are independent: Case A On 1 January 20X5, Radar Co. issued $200,000 of bonds payable with a stated interest rate of 12%, payable annually each 31 December. The bonds
On 1 July 20X2, Hendrie Corp. issued $6,000,000 of 5% (payable each 30 June and 31 December),10-year bonds payable. The bonds were issued to yield 6%. The company uses effective interest amortization
The following two cases are independent.Case A At 31 December 20X3, QML Ltd. reports the following on its statement of financial position:Accrued interest payable of $450,000 was recorded on 31
Pasquali Ltd. issues $600,000 of 9% bonds on 1 July 20X1. Additional information on the bond issue is as follows:Required:1. Record the bond issue and the first interest payment under the effective
The following balances are from the statement of financial position of Merit Ltd.Additional information:a. A portion of the 7% bond payable was retired at 101. Discount amortization of $14,700 was
Return to the facts of Assignment 13-10.Data From Assignment 13-10The following partial amortization table was developed for a 5.4%, $800,000 5-year bond that pays interest each 30 September and 31
The graph shows Huli Corp.’s interest expense and interest paid for the period 20X1 to 20X6. Huli Corp.’s overall debt composition has not changed in the period shown. The debt includes an
Fast Transportation Co. sold $1,500,000 of five-year, 12% bonds on 1 August 20X2. Additional information on the bond issue is as follows:Required:1. Record the bond issuance on 1 August 20X2.2.
The following accounts are taken from the general ledger of GRL Trading Ltd. on 31 December 20X1:Required:Prepare the shareholders’ equity section of the SFP at year-end. Assume accounts have
Tollmark Ltd. (Tollmark) is a private company founded 20 years ago by Karam Raynan. The company is in the medical supply industry, providing medical equipment to hospital and doctors offices.
Match the description with the type of dividend. Description 1. Pay dividend with non-cash item 2. Dividend takes form of certificate issued (promissory note) 3. If dividends not declared the
Wonder Ltd. has treasury stock transactions in 20X9 as follows:At the end of 20X8, Wonder Ltd. had reported the following in shareholders equity:Required:1. Prepare journal entries for the treasury
During 20X5, Walter Ltd. retired 4,000 common shares and 2,000 preferred shares, respectively. Earnings were $100,000 in 20X5, and dividends declared, $40,000. The comparative equity accounts for
Halo Ltd. has the following statement of equity as of 31 December 20X9:Where applicable, the matching dividend is $0.30 per share. Dividends were not paid in 20X7 or 20X8.Required:Compute the amount
On 31 December 20X6, Wave Exploration Ltd. reported the following in shareholders’ equity:Comprehensive income for 20X7 is as follows:Required:1. Calculate the balance in each equity account,
In 20X4, L Concept entered into an agreement with J Trax whereby J Trax agreed to purchase common shares from L Concept. Details of the transaction are as follows:• $420,000 will be paid in in
On 1 January 20X5, Dolphin Operations Ltd. reported the following in shareholders’ equity:In 20X5, the company declared and issued a 10% stock dividend. The stock dividend was to be valued at $5
Indicate if each item would increase or decrease retained earnings. Item 1. Dividends 2. Earnings 3. Share issue costs 4. Loss 5. Spinoff of investment to shareholders Increase/Decrease
The records of Victoria Corp. showed the following balances on 1 November 20X5:On 5 November 20X5, the board of directors declared a stock dividend to the shareholders of record as of 20 December
On 1 June 20X5, Lush Corp. issued $40,000,000 of 7.5% bonds, with interest paid semi-annually on 30 April and 31 October. The bonds were originally dated 1 November 20X4, and were 15-year bonds. The
Shurely Inc. lent $5,000,000 to Beeti Corp. in 20X3. Beeti Corp. has recently brought a new product to market and is having a tough time selling it. As a result, Beeti Corp. is experiencing cash flow
At the end of 20X8, Minnow Reserves Corp. reported the following in shareholders’ equity:The company had treasury stock transactions in the following sequence during 20X9:1. Purchased 100,000
Return to the facts of A13-6Data From Assignment -13-6Mathieson Co. issues a $10,000,000, 6 ½ % bond on 1 October 20X4. At this time, market interest rates are in the range of 6%. The bond had a
Roland Garment Inc. is a private company that uses ASPE for financial reporting. On 1 April, 20X5 Roland Garment Inc. issued bonds with the following characteristics:• Bond date: January 1, 20X5•
The following are independent statements pertaining to long-term liability disclosures:a. Title of the debt issue with maturity date, interest rate and amount outstanding must be disclosed.b. The
As at 31 December 20X3 Biraca Corp. has three sources of long-term debt outstanding:1. $1.3M note payable that matures on July 31, 20X62. $3M bonds payable that mature October 31, 20X83. $2.5M bank
Below are selected accounts from O’Hara Oil Corp. at 31 December 20X1. The accounts have not a been closed for the year but transactions have been correctly recorded.Required:1. Calculate
Altitude Ltd. had the following shareholders’ equity on 31 December 20X8:Earnings for 20X8 had been $216,000, and comprehensive income, which also included a $13,500 unrealized gain on an
1. Cumulative preferred shares are required to receive dividends every year.2. Par-value shares cannot be issued below par.3. Issued shares will be higher than outstanding shares if there are
On 1 January 20X5 100,000 shares of ABC Corp. are subscribed by Lucas Mapplebeck for $50 per share. The shares will be paid for in four equal instalments due every six months. The first instalment is
Cranberry Ltd. (CL) was incorporated in 20X6. Unlimited no-par common shares were authorized. IFRS was chosen for external reporting. During the first week, the company had the following share
Holimont Ltd. (HL) has unlimited no-par common shares authorized. The following transactions took place in the first year:a. To record authorization of shares by board of directors (memorandum).b.
On 1 January 20X1, Grey Corp. issued 375,000 no-par common shares at $4 per share. In 20X5, there were treasury stock transactions. On 15 January 20X5, the company purchased 4,200 of its own common
At the end of 20X2, Provoe Products Ltd. had 222,000 common shares outstanding, with a recorded value in the common share account of $875,000. Retained earnings was $673,500. During 20X3, the
Massive Corp. is authorized to issue unlimited $0.80 no-par preferred shares and unlimited no-par common shares. There are 15,000 preferred and 45,000 common shares outstanding. In a five-year
Locomotive Co. decided to raise new equity using a rights offering and on 15 June announced that it would issue one right for each share owned to existing shareholders. The company currently has
Assume the same scenario as in TR14-12.Data From TR14-12Prepare the journal entries for the following unrelated transactions:1. A truck valued at $62,000 is purchased in exchange for 4,000 preferred
Prepare the journal entries for the following unrelated transactions:1. A truck valued at $62,000 is purchased in exchange for 4,000 preferred shares. The current share price is $14.25.2. Land that
Gupta Corp. was authorized to issue unlimited common shares and had 452,000 common shares outstanding on 8 March 20X2, with a recorded value of $1,367,000. On this date, the board of directors
At the end of the 20X4 fiscal year, the shareholders’ equity section of the statement of financial position of Chomney Corp. was as follows:The board of directors was considering three
Collirs Inc. has the following accounts and account activity as of 30 June 20X5:Other information, not included in above accounts:1. Dividends of $205,000 were declared on 14 June 20X5. The last time
In order to take advantage of lower U.S. interest rates, Zhang Ltd. borrowed $8 million from a U.S. bank on 1 May 20X2. Annual interest, at 7¼%, was due each subsequent 1 May, with lump-sum
On 1 May 20X9, All-Man Imports Ltd. (AML) obtained a five-year loan from a major New York bank. The loan is for US$20,000,000, bears interest at 6% per annum (paid annually on the loan anniversary
On 1 January 20X8, a borrower arranged a $1,000,000 three-year 2% bond payable, with interest paid annually each 31 December. There was an upfront fee of $106,920, which was deducted from the cash
A 3% loan was granted to Simeoni Ltd. in 20X2. The principal amount was $8,000,000 and the term was three years. Interest is paid at the end of each year. In addition, the lender charged an upfront
Return to the facts of A13-10. The bond is now issued on 1 August 20X1.Data From A13-10The following partial amortization table was developed for a 5.4%, $800,000 5-year bond that pays interest each
The following partial amortization table was developed for a 5.4%, $800,000 5-year bond that pays interest each 30 September and 31 March. The table uses an effective interest rate of 5%. The bond
The following partial amortization table has been prepared for a 9%, $100,000 5-year bond that pays interest each 30 April and 31 October. The table uses an effective interest rate of 10%. The bond
Arbuckle Ltd. issued $80,000 of four-year, 7% bonds dated 1 December 20X5. Interest is payable semi-annually on 31 May and 30 November. The bonds were issued on 1 February 20X6. The effective
Randy Corp. issued $200,000 of 7.6% (payable each 28 February and 31 August), 4-year bonds. The bonds were dated 1 March 20X4, and mature on 28 February 20X8. The bonds were issued (to yield 8%) on
Leader Inc. has the following foreign financing: The company borrowed US$325,000, for five years, when US$1.00 = Cdn$1.01. The exchange rate at the end of the first year is US$1.00 = Cdn$1.03, and at
Hambelton Ltd. issued $4,000,000 of 5% bonds payable on 1 September 20X9 to yield 4%. Interest on the bonds is paid semi-annually and is payable each 28 February and 31 August. The bonds were dated 1
Li Corp. purchased a container load of antiques for resale at an invoice cost of $1,200,000. The goods were paid for when they were shipped in early June. The container arrived in Canada at the end
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