Question 1

Which of the following characteristic is required for a "liability" under IFRS Framework?

Accepted Answer

A)  Expected to result in the inflow of economic benefits. 
B)  Expected to result in the inflow of economic benefits that are measurable. 
C)  Expected to result in the outflow of resources embodying economic benefits. 
D)  Expected to result in the outflow of economic benefits that are virtually certain. 
A)  Expected to result in the inflow of economic benefits. 
B)  Expected to result in the inflow of economic benefits that are measurable. 
C)  Expected to result in the outflow of resources embodying economic benefits. 
D)  Expected to result in the outflow of economic benefits that are virtually certain. C

Question 2

What is true regarding royalty fees?

Accepted Answer

A)  Unpaid royalty fees are recorded as a contra asset. 
B)  Unpaid royalty fees are a debit to royalty fee expense and a credit to unearned revenue. 
C)  Royalty fees are a minor expense for publishing companies. 
D)  A franchise gives the franchisor the right to sell specified goods and/or services within a designated area. 
A)  Unpaid royalty fees are recorded as a contra asset. 
B)  Unpaid royalty fees are a debit to royalty fee expense and a credit to unearned revenue. 
C)  Royalty fees are a minor expense for publishing companies. 
D)  A franchise gives the franchisor the right to sell specified goods and/or services within a designated area. D

Question 3

For each independent situation:
1.A customer sued Vernon Tractor Corp.for $300,000 for breach of contract.Vernon's solicitors advise that they will almost certainly be found liable.Based on previous results,counsel estimates that there is a 70% probability that the courts will award the $300,000 being sought; a 20% probability that $230,000 will be conferred; and a 10% probability that the judgment will be $140,000.
2.Pickering Conveyor and Clutch Ltd.are in the midst of preparing their financial statements for the year ended December 31,2018.Pickering has been in ongoing discussions with its bankers about renewing its $2,500,000 loan maturing on June 30,2019.While nothing had been finalized by year-end,the bank did agree to extend the maturity by five years on January 15,2019.
Required:
Describe how the event should be dealt with in the financial statements and explain why.Prepare all required journal entries.

Accepted Answer

1.The loss is probable and has to be provided for.Expected value techniques may be used to determine the amount of the obligation.
[($300,000 × 70%)+ ($230,000 × 20%)+ ($140,000 × 10%)]
   2.A journal entry is not required.Rather,the $2,500,000 must be disclosed as a current liability in the 2018 financial statements as renewal was not effected before year-end.The fact that the bank agreed to renew the loan after year-end,but before the statements were authorized for issue,is disclosed as a non-adjusting event in the notes to the financial statements.

Question 4

Which statement about deferred revenue is correct?

Accepted Answer

A)  Deferred revenue is a financial liability. 
B)  Deferred revenue is a non-financial liability. 
C)  Deferred revenue is a held for trading financial liability. 
D)  Deferred revenue arises when the contract is signed. 
A)  Deferred revenue is a financial liability. 
B)  Deferred revenue is a non-financial liability. 
C)  Deferred revenue is a held for trading financial liability. 
D)  Deferred revenue arises when the contract is signed.

Question 5

AV Airlines sold a ticket on May 1,2016 for travel on Jun 15,2016 for $1,500.The customer paid at time of booking the flight.Provide the necessary journal entries.

Accepted Answer

Booking fl

Question 6

Which statement is correct?

Accepted Answer

A)  Trade payables are supported by a written promise to pay. 
B)  Trade payables with no discount terms are expected to be paid in full. 
C)  Notes payable are legally enforceable and can only be interest bearing. 
D)  Notes payables are recognized at the face value or transaction price. 
A)  Trade payables are supported by a written promise to pay. 
B)  Trade payables with no discount terms are expected to be paid in full. 
C)  Notes payable are legally enforceable and can only be interest bearing. 
D)  Notes payables are recognized at the face value or transaction price.

Question 7

RJ Magazines sells two-year magazine subscriptions for $108 cash each.The cost of producing and delivering each monthly magazine is $2.75 paid in cash at the time of delivery.RJ's sales activity for the year follows:
Sales activity
• On January 1,2017,RJ sells 22,000 subscriptions.
• On April 1,2017,RJ sells 5,000 subscriptions.
• On November 1,2017,RJ sells 12,000 subscriptions
RJ delivers the magazines at the end of the month and the year-end is December 31.
Required:
a.Prepare journal entries to record the subscription sales during the year.
b.Prepare summary journal entries to record the revenue earned during the year and the related expense.

Accepted Answer

a.
 @#IMG-DLM&_TB1321_00_TB132

Question 8

Explain some of the challenges that exist in determining the amount of a "liability" by identifying factors that influence the value of the indebtedness.

Accepted Answer

Factors include whether:
• the obligatio

Question 9

On May 1,2016,British Columbia Brew Supplies Inc.borrowed US$180,000 from its bank.British Columbia's year-end is December 31,2016.Exchange rates were as follows:
   Required:
Prepare the required journal entries to record receipt of the loan proceeds and for any adjustments required at year-end.

Accepted Answer

@#IMG-DLM&_TB1321_00

Question 10

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year-end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

Accepted Answer

Issuance
(Discount to fair value: 200,00

Question 11

Which statement is correct about provisions,contingent assets and contingent liabilities?

Accepted Answer

A)  The same probability threshold is used to record contingent liabilities and provisions. 
B)  The same probability threshold is used to record contingent assets and contingent liabilities. 
C)  Possible contingent liabilities are recorded. 
D)  Virtually certain contingent assets are recorded. 
A)  The same probability threshold is used to record contingent liabilities and provisions. 
B)  The same probability threshold is used to record contingent assets and contingent liabilities. 
C)  Possible contingent liabilities are recorded. 
D)  Virtually certain contingent assets are recorded.

Question 12

LMZ Computer Systems Inc.maintains office equipment under contract.The contracts are for labour only; customers must reimburse LMZ for parts.LMZ's rate schedule follows:
   LMZ's 2018 sales of maintenance agreements is set out below:
   Required:
Assuming that sales occurred evenly through the year:
a.What amount of revenue will LMZ recognize for the year ended December 31,2018?
b.What amount of deferred revenue will LMZ report as a current liability on December 31,2018?
c.What amount of deferred revenue will LMZ report as a non-current liability on December 31,2018?

Accepted Answer

a.Sales occurred evenly during the year,

Question 13

For each independent situation:
1.Moosehead Pool and Skeet Com.'s debt to equity ratio is 1.6: 1 based on its draft financial statements for the year ended December 31,2016.This leverage ratio exceeds the 1.5:1 maximum stipulated in Moosehead's loan agreement pertaining to a $5,000,000 loan maturing on March 15,2019.The loan agreement stipulates that the loan becomes payable on demand upon breach of any of the loan covenants.Moosehead's creditors agreed on December 15,2016 to waive their right to demand payment until December 31,2017 for reason only that the firm's leverage ratio exceeds the stipulated maximum.
2.Guelph Piano Storage Inc.issued a $30,000,30-day,non-interest bearing note to Roland's Crating for storage bins.The market rate of interest for similar transactions is 2.5%.
3.On November 30,2014,Port Meadow Fertilizer Ltd.entered into a non-cancellable agreement to buy 10 tonnes of phosphorus for $1,600 per tonne for delivery on February 28,2015.Phosphorus is a key component of the custom fertilizer that Port Meadow produces.The market price of phosphorus is extremely volatile,as evident by the $1,175 per tonne that it could be acquired for on December 31,2014.Notwithstanding the premium price paid for the phosphorus,the company expects that fertilizer sales will remain profitable.Port Meadow's year-end is December 31,2014.
Required:
For each of the situations described above,prepare the required journal entry for the underlined entity.If a journal entry is not required,explain why.

Accepted Answer

1.A journal entry is not required as the

Question 14

Which statement about contingent liabilities is correct?

Accepted Answer

A)  It is a possible obligation that arises from past transactions and events. 
B)  It is an obligation that arises from past transactions and events. 
C)  It involves uncertainty about either the timing or amount of payment. 
D)  It is a condition that depends upon the outcome of an anticipated event. 
A)  It is a possible obligation that arises from past transactions and events. 
B)  It is an obligation that arises from past transactions and events. 
C)  It involves uncertainty about either the timing or amount of payment. 
D)  It is a condition that depends upon the outcome of an anticipated event.

Question 15

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year-end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

Accepted Answer

Issuance
 @#IMG-DLM&_TB1321_00_TB1321_00_TB1321_00

Question 16

Which statement is correct?

Accepted Answer

A)  HST payable is a financial liability. 
B)  Bank overdraft is a non-financial liability. 
C)  Unearned revenue is a non-financial liability. 
D)  Unearned subscriptions are a financial liability. 
A)  HST payable is a financial liability. 
B)  Bank overdraft is a non-financial liability. 
C)  Unearned revenue is a non-financial liability. 
D)  Unearned subscriptions are a financial liability.

Question 17

Which of the following characteristic is required for a liability under IFRS Framework?

Accepted Answer

A)  Arises from a past event. 
B)  Arises from a non-financial transaction. 
C)  Arises from a future transaction. 
D)  Arises from a forecasted transaction. 
A)  Arises from a past event. 
B)  Arises from a non-financial transaction. 
C)  Arises from a future transaction. 
D)  Arises from a forecasted transaction.

Question 18

It is early in February 2017 and you are conducting the audit of Blast Off Airline's 2016 financial statements.Through discussion with Blast Off's Chief Financial Officer you learn of matters that have not yet been incorporated into the 2016 financial statements:
In July 2016,127 passengers on board Blast Off Airlines Flight 007 were seriously injured when the plane missed the runway on final approach.In January 2017,the injured passengers launched a class action lawsuit against Blast Off seeking damages of $15 million.Blast Off's internal investigation of the incident determined that the pilot was intoxicated during the flight.The company's solicitors suggest that if the matter goes to court,Blast Off will be found liable and ordered to pay the $15 million.
In an attempt to reduce its loss,Blast Off's solicitors made a settlement offer of $10 million to the plaintiffs.The litigants' attorney has not provided a formal response but has indicated that the offer is being seriously considered.Blast Off's lawyers estimate that there is a 90% probability the plaintiffs will accept the offer.
Required:
Prepare the journal entries to record the required adjustments for the above event.

Accepted Answer

To provide for the expected li

Question 19

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

Accepted Answer

Sale of go

Question 20

Explain how commitments and guarantees are accounted for under accrual accounting.

Accepted Answer

Contractual commitments pertaining to th

Which of the following characteristic is required for a "liability" under IFRS Framework?

What is true regarding royalty fees?

Which statement about deferred revenue is correct?

AV Airlines sold a ticket on May 1,2016 for travel on Jun 15,2016 for $1,500.The customer paid at time of booking the flight.Provide the necessary journal entries.

Which statement is correct?

Explain some of the challenges that exist in determining the amount of a "liability" by identifying factors that influence the value of the indebtedness.

On May 1,2016,British Columbia Brew Supplies Inc.borrowed US$180,000 from its bank.British Columbia's year-end is December 31,2016.Exchange rates were as follows: Required: Prepare the required journal entries to record receipt of the loan proceeds and for any adjustments required at year-end.

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year-end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

Which statement is correct about provisions,contingent assets and contingent liabilities?

Which statement about contingent liabilities is correct?

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year-end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

Which statement is correct?

Which of the following characteristic is required for a liability under IFRS Framework?

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

Explain how commitments and guarantees are accounted for under accrual accounting.

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Accounting Changes

Filters

Exam 1: Current Liabilities and Contingencies

Which of the following characteristic is required for a "liability" under IFRS Framework?

What is true regarding royalty fees?

Which statement about deferred revenue is correct?

AV Airlines sold a ticket on May 1,2016 for travel on Jun 15,2016 for $1,500.The customer paid at time of booking the flight.Provide the necessary journal entries.

Which statement is correct?

Explain some of the challenges that exist in determining the amount of a "liability" by identifying factors that influence the value of the indebtedness.

On May 1,2016,British Columbia Brew Supplies Inc.borrowed US$180,000 from its bank.British Columbia's year-end is December 31,2016.Exchange rates were as follows: Required: Prepare the required journal entries to record receipt of the loan proceeds and for any adjustments required at year-end.

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year-end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

Which statement is correct about provisions,contingent assets and contingent liabilities?

Which statement about contingent liabilities is correct?

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year-end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

Which statement is correct?

Which of the following characteristic is required for a liability under IFRS Framework?

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

Explain how commitments and guarantees are accounted for under accrual accounting.

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Accounting Changes

Filters