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SOLUTION MANUAL for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee SevelSolution Manual for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan £15.72
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SOLUTION MANUAL for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee SevelSolution Manual for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan
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Intermediate Accounting Volume 1 8th Editio
SOLUTION MANUAL for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee SevelSolution Manual for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan ultimate guideSOLUTION MANUAL for Intermedia...
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SOLUTION MANUAL FOR te te
Intermediate Accounting Volume 1 8E Thomas H. Beechy, Joan E.
t e t e t e t e t e t e t e t e t e
Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
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All Chapters 1-11
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Chapter 1: The Framework for Financial Reporting
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Case 1-1 t e Mulla and Yang te te
1-2 Richard Wright te
1-3 Taylor Jay te
Suggested Time te
Technical 1-1
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1-2 Chapter overview, true-false..............................
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1-3 Acronyms……………………………………… 10
1-4 IFRS or ASPE………………………………….
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1-5 IFRS or ASPE………………………………….
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1-6 Disclosed basis of accounting………………… te 10 te te
1-7 GAAP and reporting currency...........................
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1-8 GAAP and reporting currency...........................
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1-9 Users and objectives…………………………..
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1-10 Required financial statements............................
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Assignment 1-1 te IASB standard-setting......................................
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1-2 International comparisons................................ te 10
1-3 Accounting choices.......................................... te te 10
1-4 Effect of accounting policies ..........................
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1-5 Reporting alternatives......................................
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1-6 Non-IFRS situations ........................................
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1-7 Reporting situations .........................................
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1-8 Reporting situations .........................................
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1-9 Objectives of financial reporting .....................
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1-10 Impact of differing objectives .........................
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1-11 Accounting policy disagreement...................... te te 15
1-12 Accounting policies and reporting objectives.. te te te te 10
1-13 Policy choice....................................................
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,Cases
Case 1-1 (LO1.2, LO1.3, LO1.4, LO1.5)
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Notes for Discussion With Elicia: te te te te
There is a conflict of interest between the objectives of Elicia and Dabika due to the
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buyout clause in the shareholder agreement. Elicia will have a motivation to decrease
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shareholders‘ equity since this will reduce the amount that she will be required to pay to
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buy out Dabika. Dabika will be interested in increasing shareholders‘ equity to increase
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the amount she will receive. It must be clarified who I am working for since I may have a
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conflict of interest since I know both parties.
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It is important that all accounting policies are ‗fair‘ to both sides. What is considered
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‗fair‘? From Dabika‘s perspective, fair could be accounting policies consistent with prior
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years. From Elicia‘s perspective, fair could be if the economic events change the
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accounting policy would change. Fair could be both sides split the difference where
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Dabika and Elicia disagree on value. In the future it is important that the shareholders
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agreement is more specific.
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Due to the choices allowed within GAAP a policy could be selected that would be more
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beneficial to one of the parties. It is assumed since this is a small private company that
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they are using ASPE. There is no indication that neither Elicia or Dabika would be using
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IFRS nor that the bank requires it.
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Inventory
Elicia wants to write off the inventory value for the garden gnomes and statues and this
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will decrease the amount of the payment to Dabika. According to ASPE, inventory would
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be valued at the lower of cost and net realizable value. Even though this inventory has
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been sitting in the gardening centre there is still a few being sold each year. This indicates
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there is still some value associated with the inventory and therefore it should not be
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written down to zero. It should be determined what the net realizable value of this
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inventory is to determine the amount of the write off. If it is all written off and then sold
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at a later date this would not be fair to Dabika since Elicia would get the benefit of a
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reduced shareholders‘ equity and thus a lower payment required to Dabika. The purchase
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of this inventory would have been a decision made by both Dabika and Elicia so if the
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inventory is unsellable they should both bear the impact of this decision.
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Warranty
According to ASPE the accounting policy is appropriate and a warranty expense should
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be included for the guarantee. The impact is that this would decrease shareholders‘ equity
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and the amount of the payment to Dabika. This is a new policy that did not exist until this
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year. The estimate of 5% was only based on sales from the fall. Since it is a new policy
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that was made by Elicia on her own it may be appropriate that the impact of this is
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excluded from the calculation of shareholders‘ equity. At a minimum the estimate
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should
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,be reviewed to determine if it is reasonable. Furthermore, the estimate, if included in the
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shareholders‘ equity calculation, should be agreed upon by both Elicia and Dabika.
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Computer Equipment te
ASPE is flexible in the method used to depreciate assets. The declining balance method
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using 40% would write off the value of the computers in approximately two years. This is
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very fast especially for a small company that is likely to use a computer for a longer
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period of time due to limited resources as compared to a larger company. Just because the
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computer may become obsolete quickly does not mean the business will not continue to
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derive benefit from the continued use of the computer. The impact of higher depreciation
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is a reduction in the payment to Dabika. If we look at consistency with other assets it
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would be appropriate to use the straight line method. We should inquire with Elicia as to
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her rationale for choosing declining balance instead of the straight-line depreciatoin
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method used for all other assets and determine the declining method reflects the actual
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usage of the asset (i.e. more of the asset used earlier on). Since again since this was a
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decision made only be Elicia maybe it should be excluded from the calculation or maybe
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the policy should be consistent with their other assets but further information is required.
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Case 1-2 (LO1.2, LO1.3, LO1.4, LO1.5)
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Dear Richard Wright: te te
I am happy to respond to your questions regarding the accounting changes that the new
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banker has requested. It is important that you realize that the needs of the banker are
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different than your needs. The bank is interested in your ability to make loan payments;
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therefore, the banker wants to assess future cash flows, collateral and your ability to pay
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back the loan.
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First, there is the issue of moving to the accrual basis. While it‘s true that, ultimately,
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what you earn is the net cash in your pocket, the cash basis of accounting doesn‘t wholly
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capture all of the cash flows that will happen in the future. Your banker wants to know
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what liabilities you‘ll have to pay in the coming months (and years), and what amounts
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you currently are owed that will be collected in the future weeks or months. The accrual
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method really gives a clear picture of future ―cash flow‖.
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It‘s for much the same reason that he wishes you to show your cattle at market value. I‘m
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sure he recognizes that both your dairy cattle and your breeders are intended for
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continued use and are not for sale in the normal course of business.As saleable stock, the
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cattle represent a potential cash resource in the event of bankruptcy or default. After all,
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you probably use the cattle as collateral for loans, and he needs to know the value of that
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collateral.
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You should not try to estimate the value of your stock by yourself. For credibility, you
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should obtain an independent estimate. The valuation will require a professional
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evaluation (and the cost thereof), but will be necessary in order to satisfy the bank.
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te te te te te te
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, Sincerely,
Andriana
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Case 1-3 (LO1.1, LO1.2, LO1.3, LO1.4, LO1.5)
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Overview
This case is intended to get students to focus on the differences between companies and
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the various factors that have a bearing on their financial reporting objectives. Students are
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asked to prioritize the factors or characteristics that are most likely to affect each
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company‘s financial reporting.
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Company Characterics te
All three companies are private enterprises. Significant characteristics of each are as
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follows:
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Breeze Inc. te Saturn Software te Intern’l Auto Parts te te
Business New mobile phone network
te te te Custom software te Auto parts for international
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development auto makers
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Owners Private investors and venture te te te Two entrepreneurs, not
te te Wealthy family te
capitalists wealthy
Other capital Egyptian fund
t e te Pension fund—pref. shares te te Debt through investment
te te
sources
te Bank line of credit
te te te te funds and by U.S. and Cdn.
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banks
Capital Capital intensive start-upte te Salary-based operation; te Established manufacturer; te
requirements
te working capital needed
te te te expanding to gain foreign
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customers
Constraints Egypt fund has 3 board seats
te te te te te Bank covenants: te Probable debt covenants te te
– restrictions on te
dividend/salary
te
payouts
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– new debt te
Preferred dividend required te te
Reporting CRTC Pension fund te Investment funds and banks te te te
requirements Egypt fund; Japan partner
te te te Bank Potential new customers te te
IPO Not in the foreseeable future
te te te te Unlikely Yes, anticipated in 2-3 years
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probable?
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