Intermediate Financial Accounting $1$

Chapters $4,5$ Intermediate Financial Accounting $1$

Chapters $4,5$

Intermediate Financial Accounting $1$

Chapters $4,5$ & $6$

Question $1$: Income statement Classifications $(4$ marks$)$

Motivated Inc.$\text{'}$s manufacturing division lost $$140,000($net of tax$)$ for the year ended December $31,2017.$ Motivated estimates that it can sell the division at a loss of $$190,000($net of tax$).$ The division qualifies for treatment as a discontinued operation.

Required: a$)$ Explain how the discontinued operation would be measured and presented on the income statement and balance sheet under ASPE. b$)$ Explain how your answer to part $($a$)$ would be different if Motivated prepared financial statements in accordance with IFRS.

Question $2$: Multi$-$Step Income Statement $(20$ marks$)$

Presented below is information which relates to Malfour for $2017$:

$\backslash$table$[[$Collections of credit sales,$$1,100,000],[$Retained earnings, January $1,2017,800,000],[$Sales$,1,900,000],[$Selling and administrative expenses.,$290,000],[$Casualty loss $($pre$-$tax$).,350,000],[$Cash dividends declared on common stock,$34,000],[$Cost of goods sold,$1,100,000],[$Loss resulting from calculation error on depreciation,$)460,000],[$Other revenues,$180,000],[$Other expenses..,$120,000],[$Loss from early extinguishment of debt $($pre$-$tax$)...,340,000],[$Gain from transactions in foreign currencies $($pre$-$tax$).,220,000],[$Proceeds from sale of Malfour common shares $....,\mathrm{.}60,000]]$

Additional information:

On September $1,2017,$ Malfour sold one of its segments $($product line$)$ to Best Industries for a gain $($pre$-$tax$)$ of $$550,000.$ During the period January $1$ to August $31,$ the discontinued segment incurred an operating loss $($pre$-$tax$)$ of $$480,000.$ This loss is not included in any of the numbers shown above.

Included in "Selling and Administrative Expenses" is "Bad Debts Expense" of $$19,000.$ Malfour bases its bad debts expense upon a percentage of sales. In $2015$ and $2016,$ the percentage was $0\mathrm{.}5\%.$ In $2017,$ the percentage was changed to $1\%.$

Early in $2017,$ Malfour changed depreciation methods for its plant assets from the double declining$-$balance to the straight$-$line method. The affected assets were purchased at the beginning of $2012$ for $$200,000,$ had no residual value, and had useful lives of $10$ years.

Depreciation expense of $$20,000$ is included in the "Selling and Administrative Expenses" of $$290,000.$

a$)$ In good form, prepare a multiple$-$step income statement for $2017.$ Assume a $20\%$ income tax rate and that $20,000$ common shares were outstanding during the year.

b$)$ Prepare a statement of Retained earnings

Note: Malfour Limited follows ASPE. Read the question carefully, as some information does not always apply to the question at hand. For example, the change in depreciation is a change in estimate, not a change in accounting policy. It may be helpful to review the solution to E$4-10$ and P$4-10$ in your practice exercises and E$4-5$ in the study guide.

Question $3$: Statement of Financial Position$-$ Classification $(6$ marks$)$

Use the code letters listed below $(a-!k)$ to indicate, for each statement of financial position item $(1-!13)$ listed below, the usual valuation reported on the statement of financial position.

a$)$ No par value

b$)$ Current cost of replacement

c$)$ Amount payable when due, less unamortized discount or plus unamortized premium

d$)$ Amount payable when due

e$)$ Fair value at statement of financial position date

f$)$ Net realizable value

g$)$ Lower of cost or net realizable value

h$)$ Original cost less accumulated depreciation$/$amortization

i$)$ Original cost less accumulated depletion

j$)$ Historical cost

k$)$ Unexpired or unconsumed cost

Common shares

Long$-$term bonds payable

Prepaid expenses

Land $($in use$)$

Natural resources

Land $($future plant site$)$

Property, plant, and equipment

Patents

Trade accounts receivable

Trading securities

Copyrights

Merchandise inventory

Question $4$: Statement of Financial Position & Cash Flow $(23$ marks$)$

Amerac Inc. had the following statement of financial position at the end of operations for $2016$:

$\backslash$table$[[$Amerac Inc. Statement of Financial Position$],[$December $31,2016,,,,,]]$

During $2017,$ the following occurred:

Amerac liquidated its FV$-$NI portfolio as a loss of $$5,000.$

A parcel of land was purchased for $$33,000$

An additional $$25,000$ worth of common shares was issued.

Dividends totaling $$10,000$ were declared and paid to shareholders.

Net income for $2017$ was $$40,000,$ including $$10,000$ in depreciation expense.

Land was purchased through the issuance of $$30,000$ in add