Intermediate Financial Reporting

journal entry on the investor's books will include a debit to the Investment account Intermediate Financial Reporting-I b. credit to Retained E credit to the Investment account. debit to Investment Income or Loss 13. Under IFRS, which of the following is a condition for an investment to be classified as It must be a cash equivalent. It must be accounted for under the cost model b. It must primarily for trading purposes. It may be he . It is head for trading purposes, but could be held for long-term appreciation Problem 1 Multiple Choice Choose the best answer for each of the following questions and enter the identifying letter in the as well, space provided. 14. Russia Inc. owns bonds that are accounted for under the fair value through net income When the declining-balance method is used, depreciation expense for a given asset model. On December 31, 2020, the bonds have a carrying value of $248,700. The fair value at that date is $245,000. The entry to record the year-end adjustment will include a. do decline by a constant amount each year a debit to be the same each year. decrease rapidly at first, then slowly over the life of the asset. a F "FV-NI Investments. b. Investment Income or Loss. d. w vary from year to year in relation to changes in output. Unrealized Holding Loss on FV-OCI Investments. d. Other Comprehensive Income. Norway Corporation acquired land, buildings, and equipment from a bankrupt competitor at a lump-sum price of $132,000. At the time of acquisition, Norway paid 15. If Latvia Inc. acquired a 30% interest in Lithuania Lid. on January 1, 2020 for $90,000, $50.000 and paid a total cash $12,000 to have the assets appraised. The appraisal disclosed the following la reported net income of $50,000 an Land . 596,000 2020 Lithuania reportestym dividend of $20,000, applying the equity method would result in an increase (decrease) Buildings . to Latvia's Investment in Lithuania Lid. account for 2020 of Equipment.. 19,200 b. S $30,00 What costs should be assigned to the land, buildings, and equipment, respectively? $9,000. $95.000, $70.800, and $19,200 $66,000, $52,800, and $13,200 d. $(20,000) $72,000, $57,600, and $14,40 16, A replacement, which extended the life of a PPE asset, but did not increase the quality $48,000, $48,000, and $48,000 or quantity of units produced by the asset, cost $20,000. This expenditure should be Current Canadian practice indicates that the maximum period over which an intangible debited to asset should be amortized is the related asset account. b. the related asset's accumulated depreciation account. 20 years. 28 years c. an expense account. C. 40 years. retained earnings. its useful life or legal life, whichever is shorter. _17. Property, plant, and equipment are conventionally presented in the balance sheet at Purchased goodwill represents historical cost less residual value. the excess of the price paid over the fair value of the net assets obtained in a b. historical cost less accumulated depreciation. business combination. fair value less residual value. b. the excess of the price paid over the book value of the net assets obtained in a fair value less book value. business combination, c. the difference in the aggregate amount of the market prices of the shares of the Use the following information for questions 18-19. combining companies. Mongolia Corp. is considering acquiring Tibet Corp. The following information relates to Tibet d. a tangible asset. get tangible assets at cost $5,000,000 As it is generally used in accounting. what is depreciation? Net tangible assets at fair value $5,500,000 It is a process of asset valuation for balance sheet purposes. Average net income for the past four years .... $ 475,000 It applies only to long-lived intangible assets. Normal rate of return for the industry... 8% It is used to indicate a decline in market value of a long-lived asset. It is an accounting process that allocates long-lived asset cost to accounting periods. *18. What is the amount of goodwill if average excess earnings for the past four years are to be capitalized at the normal rate of return for the industry? Use the following data to answer questions 6-9. $400,000 On July 1, 2020, Bosnia Corp. purchased a new pi urchased a new piece of equipment for $300,000. The equipment $437,500 has an estimated useful life of 5 years and an estimated residual value of $25,000. Bosnia uses $440,000 the calendar year as its fiscal year, and records depreciation to the nearest month. $500,000 $60,000 What would the straight-line depreciation be for fiscal 20207 *19. What is the total amount that Mongolia should be willing to pay for Tibet if average $55,000 excess earnings for the past four years are to be capitalized at 14 $30,000 a. s $5,750,000 d. $27,500 $5,700,000 C. $5,250,000 What would be the double declining-balance depreciation for 2021? $4,600,000 $72,000 b, $96,000 Use the following information for questions 20-21. $110,000 On July 1, 2020, Bosnia Corp. purchased a new piece of equipment for $300,000. The equipment d $120,000 has an estimated useful life of 5 years and an estimated residual value of $25,000. Bosnia uses the calendar year as its fiscal year. The equipment is a Class 8 asset with a maximum CCA rate f Bosnia expensed the total cost of the equipment at the time of purchase, what was of 20%. the effect on 2020 and 2021 income before taxes, assuming Bosnia uses straight line *20. What is the maximum CCA for 2020? $245,000 understated and $55,000 overstated $60,000 $270,000 understated and $30,000 overstated b . $55.000 $272,500 understated and $55,000 overstated $30,000 $300,000 understated and $30,000 overstated $27.500 If, at the beginning of 2022, Bosnia decides the equipment still has five more years of life beyond December 31, 2021, with to the equi the same residual value, what would be the $30.000 traight-line depreciation for 20227 (Assume straight-line used in all years.) lem 2 Assignment of Costs Match the following cost items with the appropriate accounts: G. S Land Land Improvements $55,000 b. Buildings d. Other 10. Other comprehensive in 1- Interest cost incurred during building construction. non-owner sourced transactions. 2. Back taxes on land purchased to be used for building site. b. related to payment of divider 3. Assessment by city for drainage system. due to errors of other years, Building permits. due to unusual gains and losses of the current year. _11. The cost model of accounting for PP&E assets 6 . 5. Landscaping shrubs planted after building has been constructed. Demolition costs of building on land bought for plant site. should be applied to investment pro ivestment property only Interest costs incurred after completion of building construction. should be applied to other PP&E assets only 8 . Recording fees for land. d. is can be applied to all classes of PP&E including investment property. Architect's fees. is not appropriate under current Canadian GAAP. 10. Grading and filling building site. _12. When an investor is using the equity method and the investee reports net income, the