please answer the 9 short questions (7 are multiple choice)

1. Which of the following is not a fundamental focus of the IASB? a. b. c. d. To achieve convergence with the FASB. To achieve harmonization with Canadian Accounting Standards for Private Enterprises (ASPE). To provide uniform accounting standards for multinational corporations. To work with the FASB to agree on much-needed improvements to existing standards. 2. What is the Norwalk Agreement? a. b. An agreement between FASB and the U.K. AcSB to converge their respective accounting standards as soon as practicable. An agreement between the SEC chairman and the E.U. Internal Market commissioner to allow E.U. companies to list securities in the United States without providing a U.S. GAAP reconciliation. An agreement between the FASB and the IASB to make their existing standards compatible as soon as practicable and to work together to ensure compatibility in the future. c. d. An agreement between the FASB and the SEC to allow foreign companies to use IFRSs in their filing of financial statements with the SEC. 3. Lawland Co. owns 100 percent of the common shares of Minerva Co., a British company with a manufacturing plant in Oxford, England. Using IFRSs, British companies are allowed to revalue their fixed assets to current values with the revaluation adjustment recorded in a reserve account in shareholders' equity. Depreciation expense is based on the current values of any revalued assets. The revaluation adjustment is transferred from the reserve account directly to retained earnings over the life of the revalued asset. At the end of Year 7, an appraisal of Minerva's manufacturing plant indicated that the current value was 500,000 greater than its net book value and indicated an estimated remaining life of 10 years. If Minerva revalues its manufacturing plant, what impact will this revaluation have on its debt-to-equity ratio on the date of the revaluation? a. It will increase. b. It will not change. c. It will decrease. d. It cannot be determined. 4. 5. A key factor necessary for the future realization of worldwide use of common accounting standards is the convergence of IASB standards with those of a.Canada. b.the European Union. c.The United States. d.China 6. According to critics, what is the major problem with the original standards produced by the IASB? a.The pronouncements have tended to be too similar to Canadian GAAP. b.The IASB has failed to examine and report on key accounting issues. c.Too many optional methods have remained. d.Too many popular methods have been eliminated. 7.The IASB-FASB convergence project has as its goal All of the above. Having IASB standards acceptable for reporting under SEC regulations. Focusing on the elimination of minor differences that currently exist between the standards of the two bodies. Working together on the issuance of future standards in areas where serious differences exist. Which of the following best describes a difference in the application of Canadian and U.S. GAAP? Both countries adopt accounting standards based on income tax laws. American pronouncements tend to be more detailed than Canadian pronouncements. The level of inflation is a big factor in determining accounting standards in the United States but is not a big factor in Canada. Income under Canadian GAAP is typically lower than income under U.S. GAAP. Fast Ltd. is a public company that prepares its consolidated financial statements in accordance with IFRSs. Its net income in Year 2 was $202,000, and shareholders' equity at December 31, Year 2, was $1,820,000. Fast lists its shares on a U.S. stock exchange. Although no longer required to do so, Fast has decided to voluntarily provide a U.S. GAAP reconciliation. You have identified the following four areas in which Fast's accounting principles differ from U.S. GAAP. 1. Fast Company gathered the following information related to inventory that it owned on December 31, Year 2: Historical cost Replacement cost Net realizable value Normal profit margin as percentage of cost $104,000 97,000 102,000 25% 2. Fast incurred research and development costs of $502,000 in Year 1. Twenty five percent of these costs were related to development activities that meet the criteria for capitalization as an intangible asset. The newly developed product was brought to market in January Year 2 and is expected to generate sales revenue for 10 years. 3. Fast sold a building to a bank at the beginning of Year 1 at a gain of $52,000 and immediately leased the building back for a period of five years. The lease is accounted for as an operating lease. 4. Fast acquired equipment at the beginning of Year 1 at a cost of $104,000. The equipment has a five-year life with no expected residual value and is depreciated on a straight-line basis. At December 31, Year 1, Fast compiled the following information related to this equipment: Expected future cash flows from use of the equipment Present value of expected future cash flows from use of the equipment Fair value (net selling price), less costs to dispose $87,000 77,000 74,000 Required: (a) Determine the amount at which Fast should report each of the following on its balance sheet at December 31, Year 2, using (1) IFRSs and (2) U.S. GAAP. Ignore the possibility of any additional impairment or reversal of impairment loss at the end of Year 2. (Leave no cells blank - be certain to enter "0" wherever required.) (i) Inventory IFRS $ Inventory @ Dec 31, Yr 2 U.S. GAAP $ (ii) Research and development IFRS U.S. GAAP $ $ R&D @ Dec 31, Yr 2 (iii) Deferred gain on lease IFRS U.S. GAAP $ $ Deferred gain on lease @ Dec 31, Yr 2 (iv) Equipment IFRS U.S. GAAP $ $ Equipment @ Dec 31, Yr 2 (b)Prepare a reconciliation of net income for Year 2 and shareholders' equity at December 31, Year 2, under IFRSs to a U.S. GAAP basis. $ Net Income Year 2 under U.S. GAAP $ S/E @ Dec 31, Year 2 under U.S. GAAP 8.Harmandeep Ltd. is a private company in the pharmaceutical industry. It has been preparing its financial statements in accordance with ASPE. Since it has plans to go public in the next 3 to 5 years, it is considering changing to IFRSs for the current year. It wishes to adopt policies that will maximize the return on shareholders' equity. Based on the draft financial statements prepared in accordance with ASPE, its net income for Year 5 is $410,000, and its shareholders' equity at December 31, Year 5 is $3,600,000. Harmandeep has engaged you to reconcile net income and shareholders' equity from ASPE to IFRSs. You have identified the following five areas for which IFRSs differs from ASPE: 1. 2. 3. 4. 5. Impaired loansoriginal versus market rate of interest Interest costscapitalize versus expense Actuarial gains/lossesrecognize in net income versus OCI Compound financial instrumentdebt versus equity components Income taxesfuture income tax method or taxes payable method Harmandeep provides the following information with respect to each of these accounting differences. Impaired Loans One of Harmandeep's debtors is in financial difficulty and defaulted on its loan payment during the year. The outstanding balance on this loan receivable at the end of Year 5 was $261,000. Harmandeep agreed to accept five annual payments of $60,000 with the first payment due at December 31, Year 6, as a full settlement of the loan. The original interest rate on the loan was 8%. The market rate of interest for this type of loan is 6%. No adjustment has been made for the impairment of the loan receivable. Interest Costs Harmandeep arranged a loan of $1,000,000 to finance the construction of a warehouse. $500,000 was borrowed on March 1, Year 5, and another $500,000 was borrowed on October 1, Year 5. The loan is repayable over 5 years with an interest rate of 6%, with the first payment due on September 30, Year 6. The warehouse was nearly complete at the end of Year 5. No interest has been accrued on the loan at the end of Year 5. Actuarial Gains/Losses Harmandeep instituted a defined benefit pension plan in Year 3. The first actuarial evaluation, which was done as at June 30, Year 5, indicated an actuarial gain of $165,000. The expected average remaining service life of the employee workforce was 15 years at the time of the actuarial evaluation. The actuarial gain has not yet been recognized in the preliminary financial statements. Compound Financial Instrument Harmandeep issued bonds for proceeds of $1,200,000 on December 31, Year 5. The bonds are convertible into common shares at any time within the next five years. The bonds would have been worth only for $1,130,000 if they did not have the conversion feature. The proceeds on the bonds have been recognized as long-term debt in the preliminary financial statements. Income Tax Harmandeep's income tax rate has been and is expected to continue at 40%. Assume that any adjustments to accounting income for the above items are fully deductible or taxable for tax purposes. The preliminary financial statements reflect the tax payable method of accounting for income taxes. If the future income tax method were adopted, future tax liabilities should be set up for $310,000 at the end of Year 4 and $360,000 at the end of Year 5. Required: Prepare a schedule to convert net income and total shareholders' equity from the preliminary financial statements amounts to amounts under ASPE and IFRSs. Where accounting choices exist, choose policies that minimize return on total shareholders' equity under ASPE and maximize return on total shareholders' equity under IFRSs. (Leave no cells blank - be certain to enter "0" wherever required. Round intermediate computations and final answers to nearest whole dollar value. Negative amounts should be indicated by a minus sign.) Net income Description ASPE $ IFRSs $ Shareholders' equity ASPE IFRSs $ $ Preliminary financial statements Loan impairment Accrued interest payable Actuarial gains Equity portion of compound instrument Future tax liability $ $ $ $ Revised values 9.Accounting and other types of technology are imported and exported, and countries have similar accounting for this reason. Which one of the following reasons has been most significant in increasing the influence that the United States has had on accounting in Canada? a.The countries are close geographically. b.The countries have similar political systems. c.Canadian companies routinely sell shares of stock or borrow money in the United States. d.Both countries are involved in the European Community