Question

Question 3 (1 point)

Which of the following statements regarding inventory is true?

Question 3 options:

	a) Under IFRS, companies must capitalize borrowing costs, whereas ASPE allows companies to choose whether to capitalize or expense them.
	b) There are no differences between IFRS and ASPE.
	c) Under IFRS, companies must capitalize shipping costs, whereas ASPE allows companies to choose whether to capitalize or expense them.
	d) Under IFRS, companies must capitalize manufacturing overhead, whereas ASPE allows companies to choose whether to capitalize or expense them.

Question 4 (1 point)

Based on the following information, calculate the ending balance in inventory.

Opening inventory	$415,875
Purchases — lumber	$350,750
Purchases — nails	$16,250
Purchases — tools and equipment	$125,350
Total sales	$750,825
Mark up on goods	30%

Question 4 options:

	a) $330,667
	b) $257,298
	c) $205,317
	d) $782,875

Question 5 (1 point)

You, a CPA, are assisting your firm’s co-op student in learning about related-party transactions (RPTs). You decide to compare how ASPE and IFRS account for RPTs. Which of the statements below is true?

Question 5 options:

	a) IFRS and ASPE standards are completely converged in terms of RPTs; there are no differences.
	b) IFRS requires RPTs to be reported at the exchange amount of the transaction while ASPE requires RPTs to be reported at the carrying amount.
	c) IFRS does not provide guidance on measurement of RPTs but ASPE does.
	d) IFRS does not provide guidance on disclosure of RPTs but ASPE does.

Question 6 (1 point)

Flowers International Ltd. (Flowers), a wholesaler of plants, is a subsidiary of Blooms Inc. Flowers has a 25% ownership interest in Blooms Inc. Blooms Inc. sells floral bouquets nationwide and applies ASPE.
Which one of the following parties would be a related party to Blooms Inc.?

Question 6 options:

	a) The sister to the spouse of Blooms’ CEO
	b) National Delivery Service, a company owned 15% by Flowers
	c) CostGo, the largest customer of Blooms Inc.
	d) The minority shareholder of Bloom, who accounts for the investment using the equity method

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Question 7 (1 point)

Whirlwind Inc. (WI) received a grant from the Canadian government in the current fiscal year. The grant of $200,000 was paid to WI before the December 31, 20X7, year end to offset salary costs to be incurred in fiscal 20X8. WI will be entitled to this grant if it employs a specified number of students during 20X8. WI management is certain that the required student employment threshold will be met. WI applies IFRS.
What is the appropriate journal entry for WI to record in fiscal 20X7 with respect to the government grant?

Question 7 options:

	a) Dr. Cash $200,000       Cr. Salary expense $200,000
	b) Dr. Cash $200,000       Cr. Grant revenue $200,000
	c) Dr. Cash $200,000       Cr. Deferred grant revenue $200,000
	d) No journal entry is to be recorded until 20X8.

Answer 1

Question 3 . Option A is correct – Under IFRS, Borrowing costs that are incurred during acquisition or production of qualifying assets MUST be capitalized as part of the asset's cost whereas under ASPE there is an option available to companies whether to capitalize or to charge off in income statement.

Question 4. Option A is correct – Refer the calculation below.

Formula for Calculation of Closing stock: Opening Stock + Purchases – Closing Stock = Cost of goods sold

Opening Stock: 415875 (given)

Purchases: 350750+16250+125350 = 492350 (given)

Cost of goods sold = Sales – Mark up = 750825 – 750825*30/130 = 577558 (computed)

Closing Stock = 415875 + 492350 – 577558 = $330667

Question 5. Option C is correct – IFRS does not provide guidance on measurement of RPT’s

The disclosure requirements for related parties and related party transactions are significantly more extensive under IFRS compared to ASPE but IAS 24, Related Party Disclosures, only provides guidance on disclosure and an entity looks to other IFRS for guidance on measurement.

Question 6. Option D is correct -- The minority shareholder of Bloom, who accounts for the investment using the equity method.

As per the section 3840, The other party, when an investment is accounted for by the equity method and the reporting enterprise is either the investor or the investee becomes Related party.

Question 7. Option C is correct. A grant can be recognized when there is a reasonable Assurant that the entity will comply with the conditions attached to it. Since WI management is certain that require   student threshold will be met. WI can recognize the grant. Following Journal entry shall be passed in the fiscal year when grant is credited – Cash A/c Dr 200000

To Deferred grant revenue 200000