On February 10, 2011,AFMentered into a financing agreement withGigantic Bank, allowingAFMto borrow up to $6,000,000 at any time through 2013.Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan.AFMreleased financial statements for 2010 on March 25, 2011.AFMpresently has $2,250,000 of notes payable with Provincial Bank maturing March 15, 2011.The company immediately borrows $3,750,000 under the agreement withGiganticand pays off the notes payable to Provincial.The agreement withGiganticalso requiresAFMto maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common shares without prior approval byGigantic.

[44]AssumeAFMreports underASPE.From the given information only, the short-term debt for it to report on the December 31, 2010 balance sheet would be:

Select one:

a.

$0.

b.

$2,250,000

c.

$3,000,000

d.

$6,000,000

e.

None of the above mentioned answers are correct

Assume AFM reports under IFRS. From the foregoing information only,the short-term debt for it to report on the December 31, 2010 balance sheet would be:

Select one:

a.

0

b.

$2,250,000

c.

$3,000,000

d.

$6,000,000

e.

None of the above mentioned answers are correct

[46]At the time of recognition of an asset retirement obligation,the present value should be

Select one:

a.

recorded as a separate long-term asset and as an asset retirement obligation

b.

expensed and recorded as an asset retirement obligation{

c.

expensed to "Asset Retirement Expense" in the period actually paid

d.

expensed to "Asset Accretion Expense" in the period actually paid

e.

added to the related asset cost and recorded as an asset retirement obligation

AFMissued 10 year 6% convertible bonds on January 1, 2014 at 104. The bonds had a face value of $600,000 and interest was paid twice a year on July 1 and January 1.After two years, each $1,000 bond could be converted into 50 common shares. The bonds would have been sold for an amount, without the conversion feature, to yield a 10% return.On July 1, 2019, AFM split its common shares 2:1.On July 1, 2020, after the interest payment, 3/5ths of the bonds were converted into shares.The company usesIFRS, theeffective interest methodfor recording bond interest and usesthe book value methodto record security conversions.The information given above relates to Questions [47] to [49]

[47]The journal entry on January 1, 2019 would have included an amount for bonds payable of

Select one:

a.

$600,000

b.

$450,454

c.

$624,000

d.

$360,000

e.

$500,000

[48]On December 31, 2020, the amount of interest expense to be recorded would be:

Select one:

a.

$30,000

b.

$22,749

c.

$45,045

d.

$45,272

e.

$50,000

[49]On July 1, 2020, the number of common shares that would have been issued on conversion of the 3/5 of the bonds would have been:

Select one:

a.

18,000

b.

60,000

c.

30,000

d.

36,000

e.

None of the above.

AFMhad acquired Moon Travels International [MTI], Inc., which constructs and operates plants all over North America for manufacturing solid state fuel rockets.It set up and began operating a new plant in Sherbrooke, Quebec on January 1, 2020.The province requires all companies to return the land to its natural state at the end of their operations activity.MTIestimates that it will operate the plant for 20 years, at which time it will cost $25,000,000 for the land restoration project.MTIusesIFRS, an 8% discount rate and has a fiscal year ending December 31.This given information relates to Questions [50] to [53] stated below.

[50]On January 1, 2020, the journal entry required to recognize the future land restoration cost would include (amount/account):

Select one:

a.

$5,363,750; ARO liability

b.

$25,000,000; ARO liability

c.

$25,000,000; property, plant & equipment

d.

$5,363,750; loss on land restoration

e.

None of the above

[51]On December 31, 2020,the journal entry accounts required to record interest related costs on the asset retirement obligation would be:

Select one:

a.

DR Accretion Expense; CR ARO

b.

DR Interest Expense; CR ARO

c.

DR Property, Plant & Equipment; CR ARO

d.

DR Interest Expense; CR Interest Payable

e.

DR Accretion Expense; CR Contribution Surplus-ARO

52]At December 31, 2020, it was found that additional clean-up costs to be paid at the end of the project would be $140,000 at that time, due to activities undertaken in 2020.The journal entry required at December 31, 2020 would be:

Select one:

a.

DR Property, Plant & Equipment, $32,439; CR ARO, $32,439

b.

DR Overhead, $30,030; CR ARO, $30,030

c.

DR Property, Plant & Equipment $30,030; CR ARO, $30,030

d.

DR Accretion Expense, $32,439; CR Property, Plant & Equipment, $32,439

e.

[53]On January 1, 2040,MTIpays an amount of $26,000,000 for the clean-up costs.No additional activity related clean up costs were incurred beyond those in 2020 and as seen in Q59.The journal entry on January 1, 2040 would include:

Select one:

a.

DR Loss on Restoration $1,000,000

b.

DR ARO $25,000,000

c.

DR ARO $26,000,000

d.

DR Loss on Restoration $860,000

e.

None of the above answers

A few years ago,AFMhad also invested in an investment company, Loozing LeadR Inc. [LLI].For a while it functioned profitable but recently it has fallen on some hard times.LLIapproaches its creditor, The Bank Of Space to seek some concessions for its total debt coming due on December 31, 2019.The bank is holding a 10-year, 15% note for $1,500,000 which was issued at par plus the accrued interest of $225,000.LLIis negotiating for terms whereby the creditor would forgive the amount of the accrued interest.It also wants the creditor to lower the interest rate to 6% , reduce the maturity value of the note to $900,000 and extend the term of the note by 7 years.The bank agrees to most of these terms. However, LLI will have to pay a cash amount of $504,000 on December 31, 2019; and the bank agrees to extend the maturity date of the note by four years only.The market rate on December 31, 2019 is 12%.Both parties have adoptedIFRS.The information relates to Questions [54] to [56].

[54]The determination of whether this re-financing is a major-settlement or minor-modification restructure will involve comparing a value of new debt and payments assumed with the net amount of the obligation forgiven.These amounts, as calculated respectively, will be:

Select one:

a.

$1,239,985; and $1,725,000

b.

$1,172,744; and $1,725,000

c.

$668,744; and $1,500,000

d.

$1,239,985; $1,500,000

e.

None of the above

[55]LLIwill record the new note payable in the following amount:

Select one:

a.

None of the above amounts

b.

$735,985

c.

$996,000

d.

$668,744

e.

$900,000

DR Overhead $32,439; CR ARO, $32,439