hi

can you please answer these 3 questions . I have attached the file

1. On January 15, 20X8, you, a CPA, were hired under contract as a temporary replacement for the financial controller at Widespread Business Interests Corp. (WBI), a publicly accountable enterprise. WBI's regular controller took a sudden leave of absence and was unable to complete preparation of WBI's December 31, 20X7, year-end financial statements. During your first week of work at WBI you came across a number of items flagged for followup by the regular controller: i) On July 1, 20X7, WBI issued a $500,000 bond and classified it at fair value through profit or loss. The fair market value of the liability at year end was $505,000. The issuance of the bond was properly recorded, as was the interest paid on December 31. The net book value (carrying cost) of the bond at year end was $492,000. ii) On August 15, 20X7, WBI ordered equipment from a U.K. manufacturer and took delivery on November 1, 20X7. In full consideration of the exchange, WBI issued a 4%, 100,000 note, repayable to the manufacturer one year from delivery date. The equipment was not brought into use until early 20X8 due to a delay in receiving the necessary approvals to use the equipment in Canada. Exchange rate information follows: August 15, 20X7 1 = C$1.89 November 1, 20X7 1 = C$1.91 December 31, 20X7 1 = C$1.93 Average rate, Nov.-Dec. 20X7 1 = C$1.92 WBI has not yet made any journal entries related to this acquisition. iii) On October 1, 20X7, WBI began offering an expense-type three-year warranty on one of its product lines. WBI sold $3,000,000 of this product line during the quarter ending December 31, 20X7. The company forecasts that warranty costs will total approximately 2% of sales (0.5% in Year 1; 0.5% in Year 2; 1% in Year 3). To date, the $12,000 in claims paid under the warranty coverage have been debited to a general ledger account called the \"miscellaneous expense account.\" No other journal entries have been made with respect to the warranty. iv) On December 1, 20X7, WBI established an equity-settled employee stock option plan for its managers, as described below: A total of 10,000 options on common shares were granted. The exercise price was $28.00 per share, which was the same as the market price on the grant date. The options vest three years after the grant date and expire eight years after the grant date. Using an options pricing model, the fair value of the options at the grant date was determined to be $72,000. It is estimated that 75% of the options will vest. WBI's share price at December 31, 20X7, was $29.50. No journal entries have yet been made pertaining to the employee stock option plan. v) All categories of WBI's shares were originally issued on January 1, 20X1, and there have been no additional shares sold or redeemed in the intervening period. On December 19, 20X7, WBI declared a $0.50 dividend payable on January 19, 20X8, to common shareholders of record at December 24, 20X7. It also declared a dividend payable to its preference shareholders. Prior to this, dividends were last declared on December 19, 20X5. No journal entries have yet been made pertaining to the dividend declaration. Following are details of WBI's share capital as at December 19, 20X7: Issued and outstanding Common 1,000,000 Carrying value $12,370,000 Class A, $2.00, non-cumulative preference shares 100,000 2,500,000 Class B, $1.50, cumulative preference shares 200,000 5,000,000 vi) On December 21, 20X7, WBI sold (issued) 100,000 new common shares for gross proceeds of $1,250,000. The journal entry to record this transaction debited the $15,000 cost of issuing these shares to legal expenses. (Note: Either the offset or retained earnings method is acceptable.) vii) On December 22, 20X7, WBI paid $240,000 to repurchase 10,000 of its Class A preference shares on the open market. The journal entry to record this transaction debited the entire $240,000 to the Class A preference share account. viii)WBI had previously recognized a $126,000 provision for an onerous contract. You have reviewed the circumstances and have determined the remaining costs of fulfilling the contract are now $160,000. WBI can cancel this contract if it agrees to pay a $150,000 breakage fee. Required: a) Liabilities generally fall into three broad categories: financial liabilities at fair value through profit or loss (FVPL), other financial liabilities and non-financial liabilities. For each of the eight transactions above, indicate whether the obligation that resulted is a financial liability at FVPL, an other financial liability, a non-financial liability or not a liability. Support your answer with a brief description. Use a table similar to the one that follows to format your answer (4 marks): Transaction Category Rationale 1 2 3 4 5 6 7 8 b) For each of the eight transactions described above, prepare any necessary journal entries to record the transaction or correct the previously posted journal entry to ensure that the various financial statement elements are initially recognized and subsequently measured in accordance with IFRS. (7 marks) Question 2 On January 1, 20X1, Scotland Corp. issued (sold) $2,000,000 of 8%, six-year, convertible bonds that pay interest semi-annually on June 30 and December 31. The bonds sold for $2,100,000 less transaction costs of $40,000. Each $1,000 bond is convertible into 20 no par value common shares at any time after issuance. Similar non-convertible bonds were yielding 9% at the time of sale. On July 1, 20X5, 80% of the bondholders exercised the conversion option and converted $1,600,000 of the bonds to common shares. The interest payment had been made on June 30, 20X5, in the normal fashion. The market price of the common shares was $53 at the date of conversion. On July 1, 20X6, Scotland Corp. repurchased $100,000 of bonds on the open market and retired them. The bonds were yielding 7% at the time of repurchase. The interest payment had been made on June 30, 20X6, in the normal fashion. On January 1, 20X7, the remaining $300,000 of the bonds matured and were paid. The interest payment had been made on December 31, 20X6, in the normal fashion. Scotland Corp. prepares its financial statements in accordance with IFRS. Required: Prepare journal entries to record: issuance of the convertible bonds on January 1, 20X1 payment of interest and related amortization on June 30, 20X1 payment of interest and related amortization on June 30, 20X3 conversion of $1,600,000 of the bonds on July 1, 20X5 repurchase of $100,000 of the bonds on July 1, 20X6 derecognition of the remaining $300,000 of the bonds on January 1, 20X7 Question 3 Glanfield Inc. established a cash-settled stock appreciation compensation plan on January 1, 20X1. On this date, the company issued 100 cash-settled share appreciation rights (SARs) to each of its 200 employees, giving employees the right to receive cash based on the increase in the company's share price over the period the shares are held. The benchmark price of the underlying shares was established at $25.00. The plan expires on December 31, 20X9. Date SAR value Share market value January 1, 20X1 Not required $25.00 December 31, 20X1 $6.75 $27.50 December 31, 20X2 $6.00 $26.25 May 31, 20X3 Not required $29.75 December 31, 20X3 $8.25 $31.25 The SARs vest after employees provide two years of service. Other pertinent details follow: In 20X1, 20 employees left the company; it was estimated that 30 more would leave before the SARs vest. In 20X2, an additional 25 employees left the company. On May 31, 20X3, 50 plan participants exercised their SARs. Required: a) Prepare all required journal entries for the first three years of this plan. (7 marks) b) Briefly explain why companies sometimes offer stock-based compensation plans to their employees Module 5.2 Intermediate Financial Reporting 2 Project 1 Chartered Professional Accountants of Canada, CPA Canada, CPA are trademarks and/or certification marks of the Chartered Professional Accountants of Canada. 2017, Chartered Professional Accountants of Canada. All Rights Reserved. PROJECT 1 Project 1 covers material from Weeks 1, 2 and 3. It is out of 45 marks and is due at the end of Week 3. There are four separate questions in Project 1, focusing on different aspects of the curriculum covered in Weeks 1 to 3. It is recommended that you read the project details in conjunction with the student notes and make note of relevant sections that pertain to the key elements and accounting requirements in each question. Format for submission Create one Excel file with four separate worksheets to be submitted Question 1, Question 2, Question 3 and Question 4 and complete each required task in the respective worksheet. Review the Project Formatting document for instructions on formatting and submitting the required work. Journal entry amounts must include the supporting calculations, and the appropriate referencing if the supporting information is shown on a different worksheet. If journal entries for transactions already posted are prepared as part of your analysis, it should be clearly documented that these are for analysis purposes only and are not part of your answer. List your journal entries by transaction, rather than chronologically through the year. Unless instructed otherwise, round all calculations to the nearest dollar. You will not be penalized for rounding errors of less than $10. Question 1 (11 marks) On January 15, 20X8, you, a CPA, were hired under contract as a temporary replacement for the financial controller at Widespread Business Interests Corp. (WBI), a publicly accountable enterprise. WBI's regular controller took a sudden leave of absence and was unable to complete preparation of WBI's December 31, 20X7, year-end financial statements. During your first week of work at WBI you came across a number of items flagged for followup by the regular controller: i) On July 1, 20X7, WBI issued a $500,000 bond and classified it at fair value through profit or loss. The fair market value of the liability at year end was $505,000. The issuance of the bond was properly recorded, as was the interest paid on December 31. The net book value (carrying cost) of the bond at year end was $492,000. ii) On August 15, 20X7, WBI ordered equipment from a U.K. manufacturer and took delivery on November 1, 20X7. In full consideration of the exchange, WBI issued a 4%, 100,000 2/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 note, repayable to the manufacturer one year from delivery date. The equipment was not brought into use until early 20X8 due to a delay in receiving the necessary approvals to use the equipment in Canada. Exchange rate information follows: August 15, 20X7 November 1, 20X7 December 31, 20X7 Average rate, Nov.-Dec. 20X7 1 = C$1.89 1 = C$1.91 1 = C$1.93 1 = C$1.92 WBI has not yet made any journal entries related to this acquisition. iii) On October 1, 20X7, WBI began offering an expense-type three-year warranty on one of its product lines. WBI sold $3,000,000 of this product line during the quarter ending December 31, 20X7. The company forecasts that warranty costs will total approximately 2% of sales (0.5% in Year 1; 0.5% in Year 2; 1% in Year 3). To date, the $12,000 in claims paid under the warranty coverage have been debited to a general ledger account called the \"miscellaneous expense account.\" No other journal entries have been made with respect to the warranty. iv) On December 1, 20X7, WBI established an equity-settled employee stock option plan for its managers, as described below: A total of 10,000 options on common shares were granted. The exercise price was $28.00 per share, which was the same as the market price on the grant date. The options vest three years after the grant date and expire eight years after the grant date. Using an options pricing model, the fair value of the options at the grant date was determined to be $72,000. It is estimated that 75% of the options will vest. WBI's share price at December 31, 20X7, was $29.50. No journal entries have yet been made pertaining to the employee stock option plan. v) All categories of WBI's shares were originally issued on January 1, 20X1, and there have been no additional shares sold or redeemed in the intervening period. On December 19, 20X7, WBI declared a $0.50 dividend payable on January 19, 20X8, to common shareholders of record at December 24, 20X7. It also declared a dividend payable to its preference shareholders. Prior to this, dividends were last declared on December 19, 20X5. No journal entries have yet been made pertaining to the dividend declaration. Following are details of WBI's share capital as at December 19, 20X7: 3/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Common Class A, $2.00, non-cumulative preference shares Class B, $1.50, cumulative preference shares Issued and outstanding 1,000,000 100,000 200,000 Carrying value $12,370,000 2,500,000 5,000,000 vi) On December 21, 20X7, WBI sold (issued) 100,000 new common shares for gross proceeds of $1,250,000. The journal entry to record this transaction debited the $15,000 cost of issuing these shares to legal expenses. (Note: Either the offset or retained earnings method is acceptable.) vii) On December 22, 20X7, WBI paid $240,000 to repurchase 10,000 of its Class A preference shares on the open market. The journal entry to record this transaction debited the entire $240,000 to the Class A preference share account. viii)WBI had previously recognized a $126,000 provision for an onerous contract. You have reviewed the circumstances and have determined the remaining costs of fulfilling the contract are now $160,000. WBI can cancel this contract if it agrees to pay a $150,000 breakage fee. Required: a) Liabilities generally fall into three broad categories: financial liabilities at fair value through profit or loss (FVPL), other financial liabilities and non-financial liabilities. For each of the eight transactions above, indicate whether the obligation that resulted is a financial liability at FVPL, an other financial liability, a non-financial liability or not a liability. Support your answer with a brief description. Use a table similar to the one that follows to format your answer (4 marks): Transaction 1 2 3 4 5 6 7 8 Category Rationale b) For each of the eight transactions described above, prepare any necessary journal entries to record the transaction or correct the previously posted journal entry to ensure that the various financial statement elements are initially recognized and subsequently measured in accordance with IFRS. (7 marks) 4/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Question 2 (11 marks) On January 1, 20X1, Scotland Corp. issued (sold) $2,000,000 of 8%, six-year, convertible bonds that pay interest semi-annually on June 30 and December 31. The bonds sold for $2,100,000 less transaction costs of $40,000. Each $1,000 bond is convertible into 20 no par value common shares at any time after issuance. Similar non-convertible bonds were yielding 9% at the time of sale. On July 1, 20X5, 80% of the bondholders exercised the conversion option and converted $1,600,000 of the bonds to common shares. The interest payment had been made on June 30, 20X5, in the normal fashion. The market price of the common shares was $53 at the date of conversion. On July 1, 20X6, Scotland Corp. repurchased $100,000 of bonds on the open market and retired them. The bonds were yielding 7% at the time of repurchase. The interest payment had been made on June 30, 20X6, in the normal fashion. On January 1, 20X7, the remaining $300,000 of the bonds matured and were paid. The interest payment had been made on December 31, 20X6, in the normal fashion. Scotland Corp. prepares its financial statements in accordance with IFRS. Required: Prepare journal entries to record: issuance of the convertible bonds on January 1, 20X1 payment of interest and related amortization on June 30, 20X1 payment of interest and related amortization on June 30, 20X3 conversion of $1,600,000 of the bonds on July 1, 20X5 repurchase of $100,000 of the bonds on July 1, 20X6 derecognition of the remaining $300,000 of the bonds on January 1, 20X7 Question 3 (15 marks) Eagles Ltd. (EL) is preparing its financial statements for its year ended December 31, 20X4. EL's accounting income for 20X4 was $458,000. Select extracts from EL's accounting and tax records follow: Balances as at December 31, 20X3 Loss carryforward Net book value of equipment Provision for warranty Undepreciated capital cost of the equipment 5/7 $180,000 875,000 89,000 482,000 Module 5.2 Intermediate Financial Reporting 2 Project 1 Items included in determining 20X4 accounting income Cost of equipment sold Depreciation expense Dividend revenue from taxable Canadian corporations Interest on overdue amounts owing to the CRA Loss on sale of equipment Meals and entertainment expense Net book value of equipment sold Social club dues Warranty expense 150,000 98,000 7,000 1,000 17,000 6,000 89,000 4,000 26,000 Activities during 20X4 Payment of warranty costs Purchase of new equipment Remittance of tax instalments to the CRA 24,000 312,000 96,000 Other information Capital cost allowance claimed in 20X4 Development costs (deferred on the statement of financial position but fully deductible for tax purposes in 20X4) 69,000 10,000 On May 1, 20X4, the government enacted an income tax rate increase, from 30% to 32%, retroactively effective on January 1, 20X4. Management estimates that it is more likely than not that the loss carryfoward would be used. Required: a) EL reported a net deferred tax liability of $37,200 on its statement of financial position (SFP) as at December 31, 20X3. Show how this amount was determined. (4 marks) b) Calculate the current and deferred income tax that will appear on the statement of comprehensive income for the year ended December 31, 20X4, and prepare the journal entries to record the current and deferred tax expense for 20X4. (5 marks) c) Calculate the amount for the SFP accounts. Clearly indicate whether the SFP accounts are assets or liabilities. (4 marks) d) At the conclusion of 20X4, EL had used up all of the loss carryforward available to it. Assume that the loss carryforward at the beginning of 20X4 had been $600,000, rather than $180,000, and that all other information in the case facts remains unchanged. Briefly explain the most obvious way that the company could have realized the benefit of 100% of this loss carryforward in 20X4 and one benefit of using this approach. (2 marks) 6/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Question 4 (8 marks) Glanfield Inc. established a cash-settled stock appreciation compensation plan on January 1, 20X1. On this date, the company issued 100 cash-settled share appreciation rights (SARs) to each of its 200 employees, giving employees the right to receive cash based on the increase in the company's share price over the period the shares are held. The benchmark price of the underlying shares was established at $25.00. The plan expires on December 31, 20X9. Date January 1, 20X1 December 31, 20X1 December 31, 20X2 May 31, 20X3 December 31, 20X3 SAR value Not required $6.75 $6.00 Not required $8.25 Share market value $25.00 $27.50 $26.25 $29.75 $31.25 The SARs vest after employees provide two years of service. Other pertinent details follow: In 20X1, 20 employees left the company; it was estimated that 30 more would leave before the SARs vest. In 20X2, an additional 25 employees left the company. On May 31, 20X3, 50 plan participants exercised their SARs. Required: a) Prepare all required journal entries for the first three years of this plan. (7 marks) b) Briefly explain why companies sometimes offer stock-based compensation plans to their employees. (1 mark) 7/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Chartered Professional Accountants of Canada, CPA Canada, CPA are trademarks and/or certification marks of the Chartered Professional Accountants of Canada. 2017, Chartered Professional Accountants of Canada. All Rights Reserved. PROJECT 1 Project 1 covers material from Weeks 1, 2 and 3. It is out of 45 marks and is due at the end of Week 3. There are four separate questions in Project 1, focusing on different aspects of the curriculum covered in Weeks 1 to 3. It is recommended that you read the project details in conjunction with the student notes and make note of relevant sections that pertain to the key elements and accounting requirements in each question. Format for submission Create one Excel file with four separate worksheets to be submitted Question 1, Question 2, Question 3 and Question 4 and complete each required task in the respective worksheet. Review the Project Formatting document for instructions on formatting and submitting the required work. Journal entry amounts must include the supporting calculations, and the appropriate referencing if the supporting information is shown on a different worksheet. If journal entries for transactions already posted are prepared as part of your analysis, it should be clearly documented that these are for analysis purposes only and are not part of your answer. List your journal entries by transaction, rather than chronologically through the year. Unless instructed otherwise, round all calculations to the nearest dollar. You will not be penalized for rounding errors of less than $10. Question 1 (11 marks) On January 15, 20X8, you, a CPA, were hired under contract as a temporary replacement for the financial controller at Widespread Business Interests Corp. (WBI), a publicly accountable enterprise. WBI's regular controller took a sudden leave of absence and was unable to complete preparation of WBI's December 31, 20X7, year-end financial statements. During your first week of work at WBI you came across a number of items flagged for followup by the regular controller: i) On July 1, 20X7, WBI issued a $500,000 bond and classified it at fair value through profit or loss. The fair market value of the liability at year end was $505,000. The issuance of the bond was properly recorded, as was the interest paid on December 31. The net book value (carrying cost) of the bond at year end was $492,000. ii) On August 15, 20X7, WBI ordered equipment from a U.K. manufacturer and took delivery on November 1, 20X7. In full consideration of the exchange, WBI issued a 4%, 100,000 2/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 note, repayable to the manufacturer one year from delivery date. The equipment was not brought into use until early 20X8 due to a delay in receiving the necessary approvals to use the equipment in Canada. Exchange rate information follows: August 15, 20X7 November 1, 20X7 December 31, 20X7 Average rate, Nov.-Dec. 20X7 1 = C$1.89 1 = C$1.91 1 = C$1.93 1 = C$1.92 WBI has not yet made any journal entries related to this acquisition. iii) On October 1, 20X7, WBI began offering an expense-type three-year warranty on one of its product lines. WBI sold $3,000,000 of this product line during the quarter ending December 31, 20X7. The company forecasts that warranty costs will total approximately 2% of sales (0.5% in Year 1; 0.5% in Year 2; 1% in Year 3). To date, the $12,000 in claims paid under the warranty coverage have been debited to a general ledger account called the \"miscellaneous expense account.\" No other journal entries have been made with respect to the warranty. iv) On December 1, 20X7, WBI established an equity-settled employee stock option plan for its managers, as described below: A total of 10,000 options on common shares were granted. The exercise price was $28.00 per share, which was the same as the market price on the grant date. The options vest three years after the grant date and expire eight years after the grant date. Using an options pricing model, the fair value of the options at the grant date was determined to be $72,000. It is estimated that 75% of the options will vest. WBI's share price at December 31, 20X7, was $29.50. No journal entries have yet been made pertaining to the employee stock option plan. v) All categories of WBI's shares were originally issued on January 1, 20X1, and there have been no additional shares sold or redeemed in the intervening period. On December 19, 20X7, WBI declared a $0.50 dividend payable on January 19, 20X8, to common shareholders of record at December 24, 20X7. It also declared a dividend payable to its preference shareholders. Prior to this, dividends were last declared on December 19, 20X5. No journal entries have yet been made pertaining to the dividend declaration. Following are details of WBI's share capital as at December 19, 20X7: 3/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Common Class A, $2.00, non-cumulative preference shares Class B, $1.50, cumulative preference shares Issued and outstanding 1,000,000 100,000 200,000 Carrying value $12,370,000 2,500,000 5,000,000 vi) On December 21, 20X7, WBI sold (issued) 100,000 new common shares for gross proceeds of $1,250,000. The journal entry to record this transaction debited the $15,000 cost of issuing these shares to legal expenses. (Note: Either the offset or retained earnings method is acceptable.) vii) On December 22, 20X7, WBI paid $240,000 to repurchase 10,000 of its Class A preference shares on the open market. The journal entry to record this transaction debited the entire $240,000 to the Class A preference share account. viii)WBI had previously recognized a $126,000 provision for an onerous contract. You have reviewed the circumstances and have determined the remaining costs of fulfilling the contract are now $160,000. WBI can cancel this contract if it agrees to pay a $150,000 breakage fee. Required: a) Liabilities generally fall into three broad categories: financial liabilities at fair value through profit or loss (FVPL), other financial liabilities and non-financial liabilities. For each of the eight transactions above, indicate whether the obligation that resulted is a financial liability at FVPL, an other financial liability, a non-financial liability or not a liability. Support your answer with a brief description. Use a table similar to the one that follows to format your answer (4 marks): Transaction 1 2 3 4 5 6 7 8 Category Rationale b) For each of the eight transactions described above, prepare any necessary journal entries to record the transaction or correct the previously posted journal entry to ensure that the various financial statement elements are initially recognized and subsequently measured in accordance with IFRS. (7 marks) 4/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Question 2 (11 marks) On January 1, 20X1, Scotland Corp. issued (sold) $2,000,000 of 8%, six-year, convertible bonds that pay interest semi-annually on June 30 and December 31. The bonds sold for $2,100,000 less transaction costs of $40,000. Each $1,000 bond is convertible into 20 no par value common shares at any time after issuance. Similar non-convertible bonds were yielding 9% at the time of sale. On July 1, 20X5, 80% of the bondholders exercised the conversion option and converted $1,600,000 of the bonds to common shares. The interest payment had been made on June 30, 20X5, in the normal fashion. The market price of the common shares was $53 at the date of conversion. On July 1, 20X6, Scotland Corp. repurchased $100,000 of bonds on the open market and retired them. The bonds were yielding 7% at the time of repurchase. The interest payment had been made on June 30, 20X6, in the normal fashion. On January 1, 20X7, the remaining $300,000 of the bonds matured and were paid. The interest payment had been made on December 31, 20X6, in the normal fashion. Scotland Corp. prepares its financial statements in accordance with IFRS. Required: Prepare journal entries to record: issuance of the convertible bonds on January 1, 20X1 payment of interest and related amortization on June 30, 20X1 payment of interest and related amortization on June 30, 20X3 conversion of $1,600,000 of the bonds on July 1, 20X5 repurchase of $100,000 of the bonds on July 1, 20X6 derecognition of the remaining $300,000 of the bonds on January 1, 20X7 Question 3 (15 marks) Eagles Ltd. (EL) is preparing its financial statements for its year ended December 31, 20X4. EL's accounting income for 20X4 was $458,000. Select extracts from EL's accounting and tax records follow: Balances as at December 31, 20X3 Loss carryforward Net book value of equipment Provision for warranty Undepreciated capital cost of the equipment 5/7 $180,000 875,000 89,000 482,000 Module 5.2 Intermediate Financial Reporting 2 Project 1 Items included in determining 20X4 accounting income Cost of equipment sold Depreciation expense Dividend revenue from taxable Canadian corporations Interest on overdue amounts owing to the CRA Loss on sale of equipment Meals and entertainment expense Net book value of equipment sold Social club dues Warranty expense 150,000 98,000 7,000 1,000 17,000 6,000 89,000 4,000 26,000 Activities during 20X4 Payment of warranty costs Purchase of new equipment Remittance of tax instalments to the CRA 24,000 312,000 96,000 Other information Capital cost allowance claimed in 20X4 Development costs (deferred on the statement of financial position but fully deductible for tax purposes in 20X4) 69,000 10,000 On May 1, 20X4, the government enacted an income tax rate increase, from 30% to 32%, retroactively effective on January 1, 20X4. Management estimates that it is more likely than not that the loss carryfoward would be used. Required: a) EL reported a net deferred tax liability of $37,200 on its statement of financial position (SFP) as at December 31, 20X3. Show how this amount was determined. (4 marks) b) Calculate the current and deferred income tax that will appear on the statement of comprehensive income for the year ended December 31, 20X4, and prepare the journal entries to record the current and deferred tax expense for 20X4. (5 marks) c) Calculate the amount for the SFP accounts. Clearly indicate whether the SFP accounts are assets or liabilities. (4 marks) d) At the conclusion of 20X4, EL had used up all of the loss carryforward available to it. Assume that the loss carryforward at the beginning of 20X4 had been $600,000, rather than $180,000, and that all other information in the case facts remains unchanged. Briefly explain the most obvious way that the company could have realized the benefit of 100% of this loss carryforward in 20X4 and one benefit of using this approach. (2 marks) 6/7 Module 5.2 Intermediate Financial Reporting 2 Project 1 Question 4 (8 marks) Glanfield Inc. established a cash-settled stock appreciation compensation plan on January 1, 20X1. On this date, the company issued 100 cash-settled share appreciation rights (SARs) to each of its 200 employees, giving employees the right to receive cash based on the increase in the company's share price over the period the shares are held. The benchmark price of the underlying shares was established at $25.00. The plan expires on December 31, 20X9. Date January 1, 20X1 December 31, 20X1 December 31, 20X2 May 31, 20X3 December 31, 20X3 SAR value Not required $6.75 $6.00 Not required $8.25 Share market value $25.00 $27.50 $26.25 $29.75 $31.25 The SARs vest after employees provide two years of service. Other pertinent details follow: In 20X1, 20 employees left the company; it was estimated that 30 more would leave before the SARs vest. In 20X2, an additional 25 employees left the company. On May 31, 20X3, 50 plan participants exercised their SARs. Required: a) Prepare all required journal entries for the first three years of this plan. (7 marks) b) Briefly explain why companies sometimes offer stock-based compensation plans to their employees. (1 mark) 7/7