STANDARDS

IPSAS vs IAS

Identify/find the corresponding IAS/IFRSs’ for the IPSASs’ listed in the table above, then
write on at least 3 similarities and 3 differences between the respective standards

JOURNAL ENTRIES

Cash vs Accrual Accounting Entries

Company X is located in the commercial sector of Trinidad and Tobago and has been operating from 1992. The company purchased office supplies from Florida Distributors Co. Ltd on May 12, 2016 that valued US$50,000.00. Company X pays US$20,000.00 by cash on May 31, 2016, US$25,000.00 by cheque on June 2, 2016, and then settled its bill by transferring the balance from its bank account directly into the bank account of the supplier on June 3, 2016.

 Record the transactions in the books of Company X using the cash basis?
 Record the transactions in the books of Company X using the accrual basis?

Note that all transactions are to be recorded in the home currency of Company X

Goyard Corp, a privately-owned company, has 31 December year-end. The company has elected to apply ASPE for its financial reporting. On January 1, 2016, Goyard Corp bought 3,000 of the 10,000 outstanding common shares of Investee Inc. for $65,000. Coyard Corp has significant influence. On this date, Investee Inc. had assets and liabilities as follows:

The difference between book value and fair value were related to land and to equipment (which is estimated to have remaining 5-years of useful life and is depreciated using straight-line method).

At the fiscal year end December 31, 2016, Investee Inc. reported net Income of $50,000, and declared and paid total common dividends of $30,000. Goodwill was not impaired in 2016.

1. How much goodwill is inherent in the purchase price?
2. Give any required entries for Investor Limited’s books for the above events assuming that the equity method is used.
3. Other than Equity Method, what other method is permitted under ASPE?

Sonya's Christmas Tree Company began operations on April 1, 2016, when Sonya bought a parcel of land on which she intended to grow Christmas trees. The normal growth time for a Christmas tree is approximately six years, so she divided her land into seven plots. In 2016, she planted the first plot with trees and watered, cultivated, and fertilized her trees all summer. In 2017, she planted her second plot with trees and watered, cultivated, and fertilized both planted plots. She continued with her plantings and cultivation every year through 2022, when she planted the last plot. In November 2022, she harvested the first plot of trees that she had planted in 2016. In 2023, she replanted the first plot.

Required:

a.  

Explain when the company should be recognizing revenue. Why is this the case?

b.  

Using your recommended revenue recognition policy, how would Sonya account for all her costs for growing the trees?

c.

Why Sonya split her land into 7 plots, and planted only one plot each year. Why didn’t she plant ALL of the land in 2016?

Minta Corporation is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2017 financial statements contain the following information ($ in millions):

A note disclosed that the allowance for uncollectible accounts had a balance of $27 million and $51 million at the end of 2017 and 2016, respectively. Bad debt expense for 2017 was $48 million. Assume that all sales are made on a credit basis.
Required:
1. What is the amount of gross (total) accounts receivable due from customers at the end of 2017 and 2016?
2. What is the amount of bad debt write-offs during 2017?
3. Analyze changes in the gross accounts receivable account to calculate the amount of cash received from customers during 2017.
4. Analyze changes in net accounts receivable to calculate the amount of cash received from customers during 2017.
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1.

2.

4.

Navaroli Company began operations on January 5, 2015. Cost and sales information for its first two calendar years of operations are summarized below.

Manufacturing Costs: Direct materials $80 per unit Direct labor $120 per unit Factory overhead costs: Variable overhead $30 per unit Fixed overhead $14,000,000 Nonmanufacturing costs Variable selling and administrative $10 per unit Fixed selling and administrative $8,000,000 Production and sales data 2015 2016 Units produced 200,000 units 80,000 Units sold 140,000 140,000 Units in ending inventory 60,000 0 Sales price per unit $600 $600

Required

1. Prepare an income statement for the company for 2015 under absorption costing.

2. Prepare an income statement for the company for 2015 under variable costing.

3. Explain the source(s) of the difference in reported income for 2015 under the two costing methods.

4. Prepare an income statement for the company for 2016 under absorption costing.

5. Prepare an income statement for the company for 2016 under variable costing.

6. Prepare a schedule to convert variable costing income to absorption costing income for the years 2015 and 2016.

Required information

13.Required information

14.Required information

15.Required information

Popeye’s Development began operations in December 2016. When lots for industrial development are sold, Popeye’s recognizes income for financial reporting purposes in the year of the sale. For some lots, Popeye’s recognizes income for tax purposes when collected. Income recognized for financial reporting purposes in 2016 for lots sold this way was $84 million which will be collected over the next three years. Scheduled collections for 2017-2019 are as follows:

2017: 22 million

2018: 28 million

2019: 34 million

Pretax accounting income for 2016 was $126 million. The enacted tax rate is 32 percent.

Required:

1.        Assuming no differences between accounting income and taxable income other than those described above, prepare the schedule and journal entry to record income taxes in 2016.
2.        Suppose a new tax law, revising the tax rate from 32% to 21%, beginning in 2018, is enacted in 2017, when pretax accounting income was $102 million. Prepare the appropriate journal entry to record income taxes in 2017.
3.        If the new tax rate had not been enacted, what would have been the appropriate journal entry to record income taxes in 2017?

Prepare the statement of cash flow, Indirect Method

Explain step by step

Spartan Company reports $25,000 net income for the year ended December 31, 2016. Also:

1. Accounts Receivable increased by $7,500 during the year and Accounts Payable increased by $10,000 during the year. No other current assets or current liabilities were changed during 2016.

2. During 2016, Spartan reported $2,500 of Depreciation Expense.

3. During 2016, Spartan reported $2,000 gain on sale of equipment.

4. Given: Property, Plant & Equipment (PPE):

                        Beg. Balance $10,000            Ending Balance $7,000

                Accumulated Depreciation(A.D.):
                        Beg. Balance $ 3,000             Ending Balance $4,000

During the year, a piece of equipment was sold, which resulted in a Gain on Sale of Equipment of $2,000. A machine was acquired at a cost of $5,000 during the year.

5. Given: Common Stock:

                        Beg. Balance $160,000                      Ending Balance $170,000

                Long-term Debt:
                        Beg. Balance $ 150,000                     Ending Balance $130,000

                Retained Earnings:
                        Beg. Balance $ 60,000                       Ending Balance $82,000

During the year, all declared dividends were paid.

6. Cash: Beg. Balance $5,500                       Ending Balance $24,000

At the end of 2016 in the retail division, Devin runs a report that shows all products that have not sold at all in 2016. This report shows the following three products that have been discontinued by the manufacturer:

Item L78 that cost $226 and 2 are on hand. Retail price $299

Item R56 that cost $65 and 6 are on hand. Retail price $99

Item B86 that cost $148 and 4 are on hand. Retail price $265

While investigating these items, we find out that for all of them, the sales crew has marked them down 25% but that has not resulted in sales. The lack of parts and support for discontinued models concerns most customers. In early January, 2017 - Devin marks down the models listed above at 50% off retail price. They put the items in a more prominent position in the store and promote them in the online catalog. Sales start to trickle in.

Required for 2016:

1. Calculate the loss from the application of LCM for Devin if they apply LCM to individual products as of December 31, 2016.
2. Show the journal entry to record the loss calculated in 1 if necessary.
3. Show the journal entry to sell all of items L78, R56 and B86 for cash in January and February, 2017.

Computing and Assessing Plant Asset Impairment

Zeibart Company purchases equipment for $235,000 on July 1, 2012, with an estimated useful life of 10 years and expected salvage value of $28,000. Straight-line depreciation is used. On July 1, 2016, economic factors cause the market value of the equipment to decline to $97,500. On this date, Zeibart examines the equipment for impairment and estimates $127,500 in future cash inflows related to use of this equipment.

a. Is the equipment impaired at July 1, 2016?
AnswerYesNo

b. Compute the impairment loss (if any) as of 7/1/2016 as well as the depreciation expense for the 12 months from July 1, 2016 to July 1, 2017. Round calculations to the nearest dollar.
Using the financial statement effects template, show how those two entries affect Zeibart Company’s balance sheet and income statement.