Questions and Answers of Modern Advanced Accounting In Canada

Johannes Inc. acquired 80 percent of Corner Brook Ltd. common shares on January 1, Year 4, for $720,000. At that date, the fair value of the noncontrolling interest was $180,000. Corner Brook’s
Selected accounts from the financial statements for Yemellas Inc. under three different methods of accounting for its 40% interest in Wawa Ltd. are presented below. There was no acquisition
On December 31, Year 1, Peter Holdings Company purchased 100% of the outstanding shares of Kamsack Company for $12,900 cash. Three different values for Kamsack’s balance sheet accounts on the date
In its consolidated cash flow statement for the year ended December 31, Year 2, Gonzalez Corporation reported operating cash inflows of $568,000, financing cash outflows of $460,000, investing cash
Northern Lights Financial Ltd. (NLF) a Canadian entity whose functional currency is the Canadian dollar made a loan of $40,000,000 in U.S. funds on January 1, Year 1, to a green energy company,
Persaud Corp. convinced Bracebridge Inc. that the two companies should establish Renfrew Ltd. to build a new gambling casino in Renfrew. Although chances for the casino’s success were relatively
DaSilva Corp. owns 60 percent of Sherbrooke Inc.’s common shares and 35 percent of Tremblant Ltd.’s common shares. In addition, Sherbrooke owns 36 percent of Tremblant’s shares. In Year 5,
Assume that the parent purchases 100% of the subsidiary’s preferred shares for cash of $500, which is equal to the carrying amount of the preferred shares on the subsidiary’s balance sheet. How
Assume that the parent reduces its percentage ownership in the subsidiary from 80% to 70% by selling some shares to outsiders for more than the carrying amount of the shares. How will this
Access the 2020 consolidated financial statements in the annual report for Barrick Gold Corporation by going to the investor relations section of the company’s website. Answer the questions below.
Entity Y has a 60% ownership interest in Entity X. Assume that Entity X typically pays dividends equal to 40% of its income. Briefly explain whether Entity Y’s return on equity on its separate
Briefly describe how the merger of two or more NFPOs should be accounted for at the date of acquisition.
What is the underlying rule relating to the approach to be used in translating transactions carried out in a foreign currency? What approaches to translating financial statements does IAS 21 suggest?
For a combination classified as an acquisition, how should the identifiable assets acquired and the liabilities assumed be measured at the date of acquisition and how should the excess of
Piraz Inc. owns 80% of the common shares of Shiraz Ltd. and 70% of the common shares of Seleena Corp. Piraz has a debt covenant that imposes a maximum debt-to-equity ratio of two for its consolidated
On January 1, Year 17, Devi Corp. sold to Charlottetown Ltd. equipment it had purchased for $300,000 and used for eight years. Devi recorded a gain of $28,000 on the sale. The equipment has a total
Ronen Corporation’s Year 2 financial statements disclosed the following transaction with MIL, a nonconsolidated special purpose entity (SPE) that was formed by Ronen: In June Year 2, MIL
Assume that the subsidiary purchased 30% of the parent’s bonds in the open market at a cost in excess of the carrying amount of the bonds. Briefly explain whether this event will increase, decrease
Darlene Inc. purchased 20,000 common shares (20%) of Carlyle Ltd. on January 1, Year 4, for $260,000. It did not have significant influence over Carlyle. It elected to classify the investment as fair
The balance sheets of Rodriguez Ltd. and Vancouver Co. on December 31, Year 2, just before the transaction described below, were as follows: On December 31, Year 2, Rodriguez purchased 100% of
The balance sheets of A Ltd. and B Ltd. on December 30, Year 6, are as follows: On December 31, Year 6, A issued 150 common shares for all 60 outstanding common shares of B. The fair value of each
The balance sheets of Lanigan Ltd. and Macklin Co. on December 31, Year 2, just before the transaction described below, were as follows:On December 31, Year 2, Lanigan purchased all of Macklin’s
The balance sheets of Kim Ltd. and Steinbach Co. on December 31, Year 2, just before the transaction described below, were as follows: On December 31, Year 2, Kim purchased 60% of Steinbach’s
The separate entity and consolidated balance sheets of Bernard Ltd. on December 31, Year 2, just after the transaction described below, were as follows:On December 31, Year 2, Bernard purchased 100%
Access the 2020 consolidated financial statements of TC Energy Corporation (TC) by going to the investor relations section of the company’s website. Answer the questions below for 2020. When
Selected accounts from the year-to-date financial statements for Nowak Company and its wholly owned subsidiary, Shawinigan Ltd., were as follows: Additional Information • The above statements
Briefly describe the trend in reporting of investments in equity securities over the past 15 years.
On December 1, Year 2, Bar Ltd. announced its intention to acquire 800,000 outstanding voting shares of Down Corp. for $10 million in cash and one million common shares. On December 31, Year 2, the
Able Company holds a 40% interest in Zhang Corp. During the year, Able sold a portion of this investment. How should this investment be reported after the sale?
What are some reasons for the acquisition cost being in excess of the carrying amount of the acquiree’s assets and liabilities? What does this say about the accuracy of the values used in the
Access the 2020 consolidated financial statements for Kirkland Lake Gold Ltd. (KL) by going to the investor relations section of the company’s website. Answer the questions below. Round percentages
How does the debt-to-equity ratio for consolidated financial statements compare to the debt-to-equity ratio for the parent’s separate entity financial statements at the date of acquisition? Briefly
Gabrielle Ltd. purchased 80% of the outstanding shares of Gunn Ltd. Before the purchase, Gunn had a deferred charge of $10.5 million on its balance sheet. This item consisted of organization costs
What accounts on the consolidated balance sheet differ in value between fair value enterprise method and identifiable net assets method? Briefly explain why they differ.
Assume that the fair value of the subsidiary at the date of acquisition includes some goodwill. Which of the reporting methods described in this chapter would typically report the lowest debt-to
Assume that the subsidiary has some inventory that had been purchased from the parent who earned a 30% gross profit. Briefly explain whether this fact will increase, decrease or not change the
Assume that the parent has some land that had been purchased from the subsidiary who reported a gain on sale. Briefly explain whether this fact will increase, decrease or not change the
Access the 2020 consolidated financial statements for Empire Company Limited by going to the investor relations section of the company’s website. Answer the questions below. Round percentages to
Assume that the fair value is greater than carrying amount at the date of acquisition for the subsidiary’s long-term debt with 10 years to maturity. Briefly explain whether this fact will increase,
On January 1, Year 2, Taylor Corp. acquired 100% of the outstanding shares of Toronto Inc. for a total cost of $226,000. The carrying amount and fair value of Toronto’s assets and liabilities on
On January 1, Year 1, Popa Inc. acquired 100% of the outstanding common shares of Montreal Ltd. for a total cost of $6,700. Coincidently, the carrying amounts of Montreal’s assets and liabilities
Rossi Corp. purchased 55 percent of the common shares of Gatineau Ltd. in Year 3. Rossi and Gatineau reported sales of $200,000 and $120,000, respectively, in Year 4. Sales increased to $240,000 and
Kumar Inc.’s separate entity statements under the cost method and its consolidated statements for the year endedDecember 31, Year 6, are presented below.Additional Information • Kumar purchased
A subsidiary was acquired in the middle of the fiscal year of the parent. Describe the preparation of the consolidated income statement for the year.
Selected financial information (in 000s) from the financial statements of Moosomin Ltd. for Years 6 and 7 is as follows: Required (a) Convert Moosomin’s financial statements for both Year 6 and
Selected financial information from the financial statements of GravelBourg Ltd. for Years 5 through 7 is as follows:Required (a) Calculate the current ratio, debt-to-equity ratio, return on average
Angela Care Homes Ltd. (Angela) operates 14 care homes for people suffering with mental illness in Western Canada. It hopes to expand to Eastern Canada over the next few years and is considering
Becker Ltd. is a private Canadian company. It has been preparing its financial statements in accordance with ASPE but is now considering a change to IFRS. For its Year 4 financial statements, Becker
Access the 2020 consolidated financial statements of Canada Goose Holdings Inc. by going to sec.gov/edgar. Use the Search for Company Filings tab and then find the 20–F document. The financial
Adrian McCurdy has recently joined a consulting group that provides investment advice to the managers of a special investment fund. This investment fund was created by a number of NFPOs, all of which
Identify three line items on each of the statement of financial position and statement of operations for a not-for-profit organization that would not typically be seen on or would differ from the
Under the fair value enterprise method and when using the implied value approach, consolidated goodwill is determined by inference. Describe how this is achieved, and comment on its shortcomings.
Explain how value in use is typically determined for a cash-generating unit.
What are the initial entries on the working paper when the parent has used the cost method to account for its investment?
Explain how the return on equity for the shareholders of the parent differs depending on whether the gain from an intercompany sale of depreciable assets is an upstream transaction or a downstream
Briefly explain why the Canadian AcSB decided to create a separate section of the CPA Canada Handbook for private enterprises.
Goal Products Limited (GPL) is the official manufacturer and distributor of soccer balls for North American League Soccer (NALS), a professional soccer association. GPL is a private company. It has
It is January 20, Year 13. Mr. Neely, a partner in your office, wants to see you, CPA, about Bruin Car Parts Inc. (BCP), a client requiring assistance. BCP prepares its financial statements in
Access the 2017 consolidated financial statements of Brookfield Asset Management Inc. (BAM) at https://bam.brookfield.com/en/reports-and-filings and answer the questions below for 2017. When