Question

In: Accounting

Francon Construction Inc, is an international company situated in Quebec City and uses IFRS. It is...

Francon Construction Inc, is an international company situated in Quebec City and uses IFRS. It is engaged in the construction of very high scale buildings in many countries for commercial and residential uses. On January 1, 2011, it issued 15-year redeemable bonds. These bonds could be redeemed at any time five years following the date of issue, at the option of the company. If these bonds were to be redeemed earlier than their maturity date, the company would have to pay a redemption premium of 3% of the face value of the bonds redeemed (ie: at 103). Interest was paid annually on December 31.

The company showed a credit unamortized balance (ie: book value) of $777,507.12 in the Bonds Payable account on December 31, 2014. On December 31, 2015, the company prepared the following journal entry related to this bond issue:

Interest Expense $69,975.64

Cash $63,000.00

Bonds Payable $ 6,975.64

On January 1, 2016, the company redeemed all the outstanding bonds. The cash payment was equal to the unamortized balance of the bonds plus a redemption premium of $27,000.

Required:

1. With the information given above, determine

a] The coupon rate of the bond;

b] The effective rate of the bonds;

c] The face value of the bonds.

2. Prepare the journal entry required to record the redemption of the bonds.

3. Show in good format, how the company would report the bonds on their balance sheet on December 31, 2015.

4. For this part only, now assume that the above redemption of bonds by Francon Construction Inc. did not occur and that the bonds have a face value (and book value) of $800,000 due on June 30, 2026. On March 30, 2026, it issued $600,000 in common shares and used the proceeds of this against the total payment required on June 30, 2026. The financial statements for the year ended December 31, 2025 were released on April 10, 2026.

How would they classify the bond payable on the December 31, 2025 statement of financial position if they used:

-IFRS?

-ASPE?

Expert Solution

Answer :

ekkarill92 answered 2 years ago

A small city is situated on the countryside. Upstream form the city is a dam that...

A small city is situated on the countryside. Upstream form the city is a dam that provides the city's water supply. If the dam was overtopped by water, then the dam would fail and all of the water would flood through the city. There is also a danger that the dam might collapse when it is full of water and cause it to fail, also flooding the city. A) Draw a fault tree for the head event “Dam fails and...

Ben Enterprise is a small company situated in the city of Texas. Its employee records are...

Ben Enterprise is a small company situated in the city of Texas. Its employee records are kept in a registry. An employee number, which is written on an index card is used to access the employee files. The files contain a number of papers on which employee information is written. REQUIRED: Explain the kind of system being used. What are the benefits of using such a system? If you were to recommend a change of system for this...

2. Tiare’s city tour company is situated in the highly seasonal town of Moorea where the...

2. Tiare’s city tour company is situated in the highly seasonal town of Moorea where the number of visitors fluctuates greatly from month to month. City tours are very competitive in this town and Tiare is a price-taker. Her monthly fixed cost is $2,000. Her variable costs are: Quantity of tours per month Variable cost 100 $700 200 $1500 300 $2400 400 $4000 500 $5800 600 $7800 Since Tiare is a price-taker,...

The municipality of a major city in Quebec is planning to build a new bridge to...

The municipality of a major city in Quebec is planning to build a new bridge to decrease the traffic load on the existing bridges connecting both sides of the city across the river. Construction is to start in 2020 and is expected to take four years at a cost of $25 million per year. After construction is completed, the cost of operation and maintenance is expected to be $2.5 million for the first year and to increase by 2.8% per...

Suppose a construction equipment manufacturer uses hybrid pay for their domestic and international sales teams, but...

Suppose a construction equipment manufacturer uses hybrid pay for their domestic and international sales teams, but their international sales are much lower this year due to recent tariffs imposed by the US and Chinese governments. At other times in the past, domestic sales were lower than international sales due to other economic events. Should the firm adjust the terms of the hybrid pay system to provide some safety for the international sales team (which may alienate members of the domestic sales...

Canvas Corp. is a large construction company that reports under IFRS. They have recently signed a...

Canvas Corp. is a large construction company that reports under IFRS. They have recently signed a contract with Ontario Tech University to build an addition to the library. Canvas began work on the contract at the beginning of 2020. Contract information and estimates are as follows: Contract price ……………………………………………….. $ 2,000,000 Estimated costs Labour.................................................................................. $ 435,000 Materials and subcontracts ................................................. 765,000 Indirect costs........................................................................ 300,000 1,500,000 Estimated gross profit................................................................... $ 500,000 At the end of 2020, the following was the actual...

3 Subsidies for Stadiums Suppose Quebec is a city without a NHL team but they want...

3 Subsidies for Stadiums Suppose Quebec is a city without a NHL team but they want one. Demand for a hockey game in Quebec is given by: P(Qq) = 90 − 2Qq Where Qq is in thousands of fans. Phoenix currently has a team (Coyotes), but is seeking subsidies to build a new stadium. Demand for hockey in Phoenix is: P(Qp) = 70 − Qp where Qp is in thousands of fans. The marginal cost of a ticket in both...

Timber Resource Inc., a forestry company, owns timber resources in northern Quebec. The company produces lumber...

Timber Resource Inc., a forestry company, owns timber resources in northern Quebec. The company produces lumber from these resources. During 20X3, the company cut trees into logs with a fair market value of $600,000. The selling costs estimated at the time were 5% of fair value. At the end of the year, about 20% of these logs have not yet entered production. The 80% that have entered production required $175,000 of production costs to produce lumber into fixed cut lengths...

Use International Financial Reporting Standards. Research IFRS 28 and IFRS 9 in the accounting for investments...

Use International Financial Reporting Standards. Research IFRS 28 and IFRS 9 in the accounting for investments to answer the following questions related to Yahoo!’s investment on Alibaba Group (assume the fair value option is not elected): No calculation needed. a. How should Yahoo! recognize and measure its 46 percent ownership in Alibaba Group for the fiscal year ended December 31, 2005? b. How should Yahoo! recognize and measure its 24 percent ownership in Alibaba Group for the year ended December...

You want to open Louie’s place, a restaurant in Quebec City. You plan to run the...

You want to open Louie’s place, a restaurant in Quebec City. You plan to run the restaurant for two years and then retire. Start-up costs (kitchen equipment and supplies, renovations, furniture, fixtures, and the point-of-sales system), to be incurred immediately, are $500,000. Assume that all of the assets are in Class 8 and depreciated at 20%. The assets can be sold for $360,000 after two years. The restaurant will be open for 300 nights per year and you expect 100...