Test Bank for Intermediate Accounting Volume 1 8th Edition Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel

SOLUTION MANUAL FOR N N


Intermediate Accounting Volume 1 8E Thomas H. Beechy, Joan E. Conrod,
N N N N N N N N N N N


Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
N N N N N N N


AllNChaptersN1-11N [WithNAppendix]

Chapter 1: The Framework for Financial Reporting
N N N N N N




CaseN 1-1 MullaNandNYang
1-2 RichardNWright
1-3 TaylorNJay

SuggestedNTime
Technical
N 1-1 ChapterNoverview,Ntrue-falseN.............................. 10
1-2 ChapterNoverview,Ntrue-falseN.............................. 10
1-3 Acronyms……………………………………… 10
1-4 IFRSNorNASPE…………………………………. 10
1-5 IFRSNorNASPE…………………………………. 10
1-6 DisclosedNbasisNofNaccounting………………… 10
1-7 GAAPNandNreportingNcurrencyN........................... 10
1-8 GAAPNandNreportingNcurrencyN........................... 10
1-9 UsersNandNobjectives………………………….. 10
1-10 RequiredNfinancialNstatementsN............................ 10

AssignmentN1-1 IASBNstandard-setting...................................... 10
1-2 InternationalNcomparisons................................ 10
1-3 AccountingNchoicesN.......................................... 10
1-4 EffectNofNaccountingNpoliciesN .......................... 15
1-5 ReportingNalternativesN...................................... 10
1-6 Non-IFRSNsituationsN........................................ 15
1-7 ReportingNsituationsN......................................... 20
1-8 ReportingNsituationsN......................................... 15
1-9 ObjectivesNofNfinancialNreportingN..................... 20
1-10 ImpactNofNdifferingNobjectivesN ......................... 20
1-11 AccountingNpolicyNdisagreement...................... 15
1-12 AccountingNpoliciesNandNreportingNobjectives.. 10
1-13 PolicyNchoiceN.................................................... 20




©N2022NMcGrawNHill.NAllNrightsNreserve
SolutionsNManualNtoNaccompanyNIntermediateNAccounting,NVolumeN1,N8thN editi d
on 4-1

,Cases

CaseN1-1N(LO1.2,NLO1.3,NLO1.4,NLO1.5)

NotesNforNDiscussionNWithNElicia:

ThereNisNaNconflictNofNinterestNbetweenNtheNobjectivesNofNEliciaNandNDabikaNdueNtoNtheNbu
youtNclauseNinNtheNshareholderNagreement.NEliciaNwillNhaveNaNmotivationNtoNdecreaseNshar
eholders‘NequityNsinceNthisNwillNreduceNtheNamountNthatNsheNwillNbeNrequiredNtoNpayNtoNbu
yNoutNDabika.NDabikaNwillNbeNinterestedNinNincreasingNshareholders‘NequityNtoNincreaseNth
eNamountNsheNwillNreceive.NItNmustNbeNclarifiedNwhoNINamNworkingNforNsinceNINmayNhaveNaN
conflictNofNinterestNsinceNINknowNbothNparties.

ItN isN importantN thatN allN accountingN policiesN areN ‗fair‘N toN bothN sides.N WhatN isN considered
‗fair‘?NFromNDabika‘sNperspective,NfairNcouldNbeNaccountingNpoliciesNconsistentNwithNprio
rNyears.NFromNElicia‘sNperspective,NfairNcouldNbeNifNtheNeconomicNeventsNchangeNtheNacco
untingNpolicyNwouldNchange.NFairNcouldNbeNbothNsidesNsplitNtheNdifferenceNwhereNDabikaN
andNEliciaNdisagreeNonNvalue.NInNtheNfutureNitNisNimportantNthatNtheNshareholdersNagreemen
tNisNmoreNspecific.

DueNtoNtheNchoicesNallowedNwithinNGAAPNaNpolicyNcouldNbeNselectedNthatNwouldNbeNmore
NbeneficialNtoNoneNofNtheNparties.NItNisNassumedNsinceNthisNisNaNsmallNprivateNcompanyNthatN

theyNareNusingNASPE.NThereNisNnoNindicationNthatNneitherNEliciaNorNDabikaNwouldNbeNusin
gNIFRSNnorNthatNtheNbankNrequiresNit.

Inventory
EliciaNwantsNtoNwriteNoffNtheNinventoryNvalueNforNtheNgardenNgnomesNandNstatuesNandNthisN
willNdecreaseNtheNamountNofNtheNpaymentNtoNDabika.NAccordingNtoNASPE,NinventoryNwou
ldNbeNvaluedNatNtheNlowerNofNcostNandNnetNrealizableNvalue.NEvenNthoughNthisNinventoryNha
sNbeenNsittingNinNtheNgardeningNcentreNthereNisNstillNaNfewNbeingNsoldNeachNyear.NThisNindic
atesNthereNisNstillNsomeNvalueNassociatedNwithNtheNinventoryNandNthereforeNitNshouldNnotNbeN
writtenNdownNtoNzero.NItNshouldNbeNdeterminedNwhatNtheNnetNrealizableNvalueNofNthisNinven
toryNisN toNdetermineN theN amountN ofNtheNwriteN off.N IfN itN isN allN writtenNoffN andNthenNsoldNatN
aNlaterNdateNthisNwouldNnotNbeNfairNtoNDabikaNsinceNEliciaNwouldNgetNtheNbenefitNofNaNredu
cedNshareholders‘NequityNandNthusNaNlowerNpaymentNrequiredNtoNDabika.NTheNpurchaseNofN
thisNinventoryNwouldNhaveNbeenNaNdecisionNmadeNbyNbothNDabikaNandNEliciaNsoNifNtheNinv
entoryNisNunsellableNtheyNshouldNbothNbearNtheNimpactNofNthisNdecision.

Warranty
AccordingNtoNASPENtheNaccountingNpolicyNisNappropriateNandNaNwarrantyNexpenseNshouldN
beNincludedNforNtheNguarantee.NTheNimpactNisNthatNthisNwouldNdecreaseNshareholders‘Nequi
tyNandNtheNamountNofNtheNpaymentNtoNDabika.NThisNisNaNnewNpolicyNthatNdidNnotNexistNuntil
NthisN
year.NTheNestimateNofN5%NwasNonlyNbasedNonNsalesNfromNtheNfall.NSinceNitNisNaNnewNp
olicyNthatNwasNmadeNbyNEliciaNonNherNownNitNmayNbeNappropriateNthatNtheNimpactNofNthisNi
sNexcludedNfromNtheNcalculationNofNshareholders‘Nequity.NAtNaNminimumNtheNestimateNsho
uld

N©2022NMcGrawNHill.NAllNrightsNreserved
2-2 SolutionsNManualNtoNaccompanyNIntermediateNAccounting,NVolumeN1,N8thN editi
on

,beNreviewedNtoNdetermineNifNitNisNreasonable.NFurthermore,NtheNestimate,NifNincludedNinNth
eNshareholders‘NequityNcalculation,NshouldNbeNagreedNuponNbyNbothNEliciaNandNDabika.

ComputerNEquipment
ASPENisNflexibleNinNtheNmethodNusedNtoNdepreciateNassets.NTheNdecliningNbalanceNmethodN
usingN40%NwouldNwriteNoffNtheNvalueNofNtheNcomputersNinNapproximatelyNtwoNyears.NThis
NisN
veryNfastNespeciallyNforNaNsmallNcompanyNthatNisNlikelyNtoNuseNaNcomputerNforNaNlongerN
periodNofNtimeNdueNtoNlimitedNresourcesNasNcomparedNtoNaNlargerNcompany.NJustNbecauseNt
heNcomputerNmayNbecomeNobsoleteNquicklyNdoesNnotNmeanNtheNbusinessNwillNnotNcontinue
NtoNderiveNbenefitNfromNtheNcontinuedNuseNofNtheNcomputer.NTheNimpactNofNhigherNdepreci

ationNisNaNreductionNinNtheNpaymentNtoNDabika.NIfNweNlookNatNconsistencyNwithNotherNasset
sNitNwouldNbeNappropriateNtoNuseNtheNstraightNlineNmethod.NWeNshouldNinquireNwithNEliciaN
asNtoNherNrationaleNforNchoosingNdecliningNbalanceNinsteadNofNtheNstraight-
lineNdepreciatoinNmethodNusedNforNallNotherNassetsNandNdetermineNtheNdecliningNmethodNref
lectsNtheNactualNusageNofNtheNassetN(i.e.NmoreNofNtheNassetNusedNearlierNon).NSinceNagainNsin
ceNthisNwasNaNdecisionNmadeNonlyNbeNEliciaNmaybeNitNshouldNbeNexcludedNfromNtheNcalcul
ationNorNmaybeNtheNpolicyNshouldNbeNconsistentNwithNtheirNotherNassetsNbutNfurtherNinform
ationNisNrequired.

CaseN1-2N(LO1.2,NLO1.3,NLO1.4,NLO1.5)

DearNRichardNWright:

INamNhappyNtoNrespondNtoNyourNquestionsNregardingNtheNaccountingNchangesNthatNtheNnewN
bankerNhasNrequested.NItNisNimportantNthatNyouNrealizeNthatNtheNneedsNofNtheNbankerNareNdif
ferentNthanNyourNneeds.NTheNbankNisNinterestedNinNyourNabilityNtoNmakeNloanNpayments;Nth
erefore,NtheNbankerNwantsNtoNassessNfutureNcashNflows,NcollateralNandNyourNabilityNtoNpayNb
ackNtheNloan.

First,NthereNisNtheNissueNofNmovingNtoNtheNaccrualNbasis.NWhileNit‘sNtrueNthat,Nultimately,Nw
hatNyouNearnNisNtheNnetNcashNinNyourNpocket,NtheNcashNbasisNofNaccountingNdoesn‘tNwhollyN
captureNallNofNtheNcashNflowsNthatNwillNhappenNinNtheNfuture.NYourNbankerNwantsNtoNknowN
whatNliabilitiesNyou‘llNhaveNtoNpayNinNtheNcomingNmonthsN(andNyears),NandNwhatNamountsN
youNcurrentlyNareNowedNthatNwillNbeNcollectedNinNtheNfutureNweeksNorNmonths.NTheNaccrual
NmethodNreallyNgivesNaNclearNpictureNofNfutureN―cashNflow‖.




It‘sNforNmuchNtheNsameNreasonNthatNheNwishesNyouNtoNshowNyourNcattleNatNmarketNvalue.NI‘
mNsureNheNrecognizesNthatNbothNyourNdairyNcattleNandNyourNbreedersNareNintendedN forNcont
inuedNuseNandNareNnotNforNsaleNinNtheNnormalNcourseNofNbusiness.AsNsaleableNstock,NtheNca
ttleNrepresentNaNpotentialNcashNresourceNinNtheNeventNofNbankruptcyNorNdefault.NAfterNall,Ny
ouNprobablyNuseNtheNcattleNasNcollateralNforNloans,NandNheNneedsNtoNknowNtheNvalueNofNthat
Ncollateral.




YouNshouldNnotNtryNtoNestimateNtheNvalueNofNyourNstockNbyNyourself.NForNcredibility,NyouN
shouldNobtainNanNindependentNestimate.NTheNvaluationNwillNrequireNaNprofessionalNevaluat
ionN(andNtheNcostNthereof),NbutNwillNbeNnecessaryNinNorderNtoNsatisfyNtheNbank.


©N2022NMcGrawNHill.NAllNrightsNreserve
SolutionsNManualNtoNaccompanyNIntermediateNAccounting,NVolumeN1,N8thN editi d
on 4-3

, Sincerely,N
Andriana

CaseN1-3N(LO1.1,NLO1.2,NLO1.3,NLO1.4,NLO1.5)

Overview

ThisNcaseNisNintendedNtoNgetNstudentsNtoNfocusNonNtheNdifferencesNbetweenNcompaniesNand
NtheNvariousNfactorsNthatNhaveNaNbearingNonNtheirNfinancialNreportingNobjectives.NStudentsN

areNaskedNtoNprioritizeNtheNfactorsNorNcharacteristicsNthatNareNmostNlikelyNtoNaffectNeachNco
mpany‘sNfinancialNreporting.

CompanyNCharacterics

AllNthreeNcompaniesNareNprivateNenterprises.NSignificantNcharacteristicsNofNeachNareNasNfoll
ows:

BreezeNInc. SaturnNSoftware Intern’lNAutoNParts
Business NewNmobileNphoneNnetwork CustomNsoftware AutoNpartsNforNinternational
development autoNmakers
Owners PrivateNinvestorsNandNventure TwoNentrepreneurs,Nnot WealthyNfamily
capitalists wealthy
OtherN capitalNs EgyptianNfund PensionNfund— DebtNthroughNinvestmentNf
ources pref.NsharesNBankNlineNofNc undsNandNbyNU.S.NandNCdn
redit .
banks
CapitalNrequ CapitalNintensiveNstart-up Salary- EstablishedNmanufacturer
irements basedNoperation;Nworki ;NexpandingNtoNgainNforeig
ngNcapitalNneeded n
customers
Constraints EgyptNfundNhasN3NboardNseats BankNcovenants: ProbableNdebtNcovenants
– restrictionsNonNdivide
nd/salaryNpayouts
– newNdebt
PreferredNdividendNrequired
Reporting CRTC PensionNfund InvestmentNfundsNandNbanks
requirements EgyptNfund;NJapanNpartner Bank PotentialNnewNcustomers
IPO NotNinNtheNforeseeableNfuture Unlikely Yes,NanticipatedNinN2-3Nyears
probable?




©2022NMcGrawNHill.NAllNrightsNreserved
N

2-4 SolutionsNManualNtoNaccompanyNIntermediateNAccounting,NVolumeN1,N8thN editi
on