Intermediate Accounting Volume 1 7th Edition Beechy Solutions Manual.pdf

SOLUTION MANUAL FOR M M


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


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


AllMChaptersM1-11M M [WithMAppendix]


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




CaseM 1-1 MullaMand MYang
1-2 Richard MWright
1-3 TaylorMJay

Suggested MTim
eMTechnical 1-1 ChapterMoverview,Mtrue-falseM.............................. 10
1-2 ChapterMoverview,Mtrue-falseM.............................. 10
1-3 Acronyms……………………………………… 10
1-4 IFRSMorMASPE…………………………………. 10
1-5 IFRSMorMASPE…………………………………. 10
1-6 Disclosed MbasisMof Maccounting………………… 10
1-7 GAAPMand MreportingMcurrencyM........................... 10
1-8 GAAPMand MreportingMcurrencyM........................... 10
1-9 UsersMand Mobjectives………………………….. 10
1-10 Required MfinancialMstatementsM............................ 10

Assignment M1-1 IASBMstandard-setting...................................... 10
1-2 InternationalMcomparisons................................ 10
1-3 AccountingMchoicesM.......................................... 10
1-4 Effect Mof MaccountingMpoliciesM .......................... 15
1-5 ReportingMalternativesM...................................... 10
1-6 Non-IFRSMsituationsM........................................ 15
1-7 ReportingMsituationsM......................................... 20
1-8 ReportingMsituationsM......................................... 15
1-9 ObjectivesMof MfinancialMreportingM..................... 20
1-10 Impact Mof MdifferingMobjectivesM ......................... 20
1-11 AccountingMpolicyMdisagreement...................... 15
1-12 AccountingMpoliciesMand MreportingMobjectives.. 10
1-13 PolicyMchoiceM.................................................... 20




©M2022 MMcGraw M Hill.M AllMright s Mrese rv
Solutions MM anualMt oMac com pa nyM Inte rmedia te M Acc ount ing,M Volume M1 ,M8 thM edi ed
tion 2-1

,Cases

CaseM1-1M(LO1.2,MLO1.3,MLO1.4,MLO1.5)

NotesMforMDiscussionMWithMElicia:

ThereM isMaMconflict Mof Minterest MbetweenMtheMobjectivesMof MEliciaMand MDabikaMdueMtoMtheM
buyout MclauseMinMtheMshareholderMagreement.MEliciaMwillMhaveMaMmotivationMtoMdecreaseM
shareholders‘MequityMsinceMthisMwillMreduceMtheMamount Mthat MsheMwillMbeMrequired MtoMpay
MtoMbuyMout MDabika.MDabikaMwillMbeMinterested MinMincreasingMshareholders‘MequityMtoMinc

reaseMtheMamount MsheMwillM receive.MIt Mmust MbeMclarified MwhoMI MamMworkingMforMsinceMI M
mayMhaveMaMconflict Mof Minterest MsinceMI Mknow MbothMparties.

It M isM important M that M allM accountingM policiesM areM ‗fair‘M toM bothM sides.M What M isM considered
‗fair‘?MFromMDabika‘sMperspective,MfairMcould MbeMaccountingMpoliciesMconsistent MwithMpr
iorMyears.MFromMElicia‘sMperspective,MfairMcould MbeMif MtheMeconomicMeventsMchangeMtheMa
ccountingMpolicyMwould Mchange.MFairMcould MbeMbothMsidesMsplit MtheMdifferenceMwhereMDa
bikaMand MEliciaMdisagreeMonMvalue.MInMtheMfutureMit MisMimportant Mthat MtheMshareholdersMa
greement MisMmoreMspecific.

DueMtoMtheMchoicesMallowed MwithinMGAAPMaMpolicyMcould MbeMselected Mthat Mwould MbeMm
oreMbeneficialMtoMoneMof MtheMparties.MIt MisMassumed MsinceMthisMisMaMsmallMprivateMcompan
yMthat MtheyMareMusingMASPE.MThereMisMnoM indicationMthat MneitherMEliciaMorMDabikaMwoul
d MbeMusingMIFRSMnorMthat MtheMbankMrequiresMit.

Inventory
EliciaMwantsMtoMwriteMoff MtheMinventoryMvalueMforMtheMgardenMgnomesMand MstatuesMand Mt
hisMwillMdecreaseMtheMamount Mof MtheMpayment MtoMDabika.MAccordingMtoMASPE,Minventor
yMwouldMbeMvalued Mat MtheMlowerMof McostMandMnet MrealizableMvalue.MEvenMthoughMthisMinv
entoryMhasMbeenMsittingMinMtheMgardeningMcentreMthereMisMstillMaMfewMbeingMsold MeachMyea
r.MThisMindicatesMthereMisMstillMsomeMvalueMassociated MwithMtheMinventoryMand MthereforeMi
t Mshould Mnot MbeMwrittenMdownMtoMzero.MIt Mshould MbeMdetermined Mwhat MtheMnet MrealizableM
valueMof MthisMinventoryMisMtoMdetermineMtheMamount Mof MtheMwriteMoff.MIf Mit MisMallMwrittenM
off Mand MthenMsold Mat MaMlaterMdateMthisMwould Mnot MbeMfairMtoMDabikaMsinceMEliciaMwould Mg
et MtheMbenefit Mof MaMreduced Mshareholders‘MequityMand MthusMaMlowerMpayment Mrequired MtoM
Dabika.MTheMpurchaseMof MthisMinventoryMwould MhaveMbeenMaMdecisionMmadeMbyMbothMDa
bikaMand MEliciaMsoMif MtheMinventoryMisMunsellableMtheyMshould MbothMbearMtheMimpact Mof Mt
hisMdecision.

Warranty
AccordingMtoMASPEMtheMaccountingMpolicyMisMappropriateMand MaMwarrantyMexpenseMshou
ld MbeMincluded MforMtheMguarantee.MTheMimpact MisMthat MthisMwould MdecreaseMshareholders‘
MequityMand MtheMamount MofMtheMpayment MtoMDabika.MThisMisM aMnew MpolicyMthat Mdid Mnot Me

xist MuntilMthisMyear.M TheMestimateMof M5%MwasMonlyMbased MonMsalesMfromMtheMfall.MSinceM i
t MisMaMnew MpolicyMthat MwasMmadeMbyMEliciaMonMherMownMit MmayMbeMappropriateMthat MtheMi
mpact Mof MthisMisMexcluded MfromMtheMcalculationMof Mshareholders‘Mequity.MAt MaMminimum
MtheMestimateMshould


M©2022 MMcGra w MH ill.M AllMrights Mre serve d
2-2 Solutions MM anualMt oMac com pa nyM Inte rme diate M Acc ount ing,M Volume M1 ,M8 th M edi
tion

,beMreviewed MtoMdetermineMif Mit MisMreasonable.MFurthermore,MtheMestimate,Mif Mincluded MinM
theMshareholders‘MequityMcalculation,Mshould MbeMagreed MuponMbyMbothMEliciaMand MDabika
.

ComputerMEquipment
ASPEMisMflexibleMinMtheMmethod Mused MtoMdepreciateMassets.MTheMdecliningMbalanceM meth
od MusingM40%Mwould MwriteMoff MtheMvalueMof MtheMcomputersMinMapproximatelyMtwoMyears.
MThisM isMveryMfast MespeciallyMforMaMsmallMcompanyMthat MisMlikelyMtoMuseMaMcomputerMforM

aMlongerMperiod Mof MtimeMdueMtoMlimited MresourcesMasMcompared MtoMaMlargerMcompany.MJus
t MbecauseMtheMcomputerMmayMbecomeMobsoleteMquicklyMdoesMnot MmeanMtheMbusinessMwill
Mnot McontinueMtoMderiveMbenefit MfromMtheMcontinued MuseMof MtheMcomputer.MTheMimpact Mof

MhigherMdepreciationMisM aMreductionMinMtheMpayment MtoMDabika.MIf MweMlookMat Mconsistenc

yMwithMotherMassetsMit Mwould MbeMappropriateMtoMuseMtheMstraight MlineMmethod.MWeMshould
MinquireMwithMEliciaMasMtoMherMrationaleMforMchoosingMdecliningMbalanceMinstead Mof MtheMst

raight-
lineMdepreciatoinMmethod Mused MforMallMotherMassetsMand MdetermineMtheMdecliningMmethod
MreflectsMtheMactualMusageMof MtheMasset M(i.e.MmoreMof MtheMasset MusedMearlierMon).MSinceMag

ainMsinceMthisMwasMaMdecisionMmadeMonlyMbeMEliciaMmaybeM it Mshould MbeMexcluded MfromMt
heMcalculationMorMmaybeMtheMpolicyMshould MbeMconsistent MwithMtheirMotherMassetsMbut Mfur
therMinformationMisMrequired.

CaseM1-2M(LO1.2,MLO1.3,MLO1.4,MLO1.5)

DearMRichard MWright:

I MamMhappyMtoMrespond MtoMyourMquestionsMregardingMtheMaccountingMchangesMthat MtheMne
w MbankerMhasMrequested.MIt MisMimportant Mthat MyouMrealizeMthat MtheMneedsMof MtheMbankerMa
reMdifferent MthanMyourMneeds.MTheMbankMisMinterested MinMyourMabilityMtoMmakeMloanMpaym
ents;Mtherefore,MtheMbankerMwantsMtoMassessMfutureMcashMflows,McollateralMand MyourMabilit
yMtoMpayMbackMtheMloan.

First,MthereMisMtheMissueMof MmovingMtoMtheMaccrualMbasis.MWhileM it‘sMtrueMthat,Multimately,
Mwhat MyouMearnMisMtheMnet McashMinMyourMpocket,MtheMcashMbasisMof MaccountingMdoesn‘t Mw

hollyMcaptureMallMof MtheMcashMflowsMthat MwillMhappenMinMtheMfuture.MYourMbankerMwantsMt
oMknow MwhatMliabilitiesMyou‘llMhaveMtoMpayMinMtheMcomingMmonthsM(and Myears),Mand Mwha
t MamountsMyouMcurrentlyMareMowed Mthat MwillMbeMcollected MinMtheMfutureMweeksMorMmonths
.MTheMaccrualMmethod MreallyMgivesMaMclearMpictureMof MfutureM―cashMflow‖.

It‘sMforMmuchMtheMsameMreasonMthat MheMwishesMyouMtoMshow MyourMcattleMat Mmarket Mvalue.
MI‘mMsureMheMrecognizesMthat MbothMyourMdairyMcattleMand MyourMbreedersMareMintended Mfor

M continued MuseMand MareMnot MforMsaleMinMtheMnormalMcourseMof Mbusiness.AsMsaleableMstoc

k,MtheMcattleMrepresent MaMpotentialMcashMresourceM inMtheMevent Mof MbankruptcyMorMdefault.M
AfterMall,MyouMprobablyMuseMtheMcattleMasMcollateralMforMloans,Mand MheMneedsMtoMknow Mth
eMvalueMof Mthat Mcollateral.

YouMshould Mnot MtryMtoMestimateMtheMvalueMof MyourMstockMbyMyourself.MForMcredibility,Myo
uMshould MobtainManMindependent Mestimate.MTheMvaluationMwillMrequireMaMprofessionalMeva
luationM(and MtheMcost Mthereof),Mbut MwillMbeMnecessaryMinMorderMtoMsatisfyMtheMbank.
©M2022 MMcGraw M Hill.M AllMright s Mrese rv
Solutions MM anualMt oMac com pa nyM Inte rmedia te M Acc ount ing,M Volume M1 ,M8 thM edi ed
tion 2-3

, Sincerely,MA
ndriana

CaseM1-3M(LO1.1,MLO1.2,MLO1.3,MLO1.4,MLO1.5)

Overview

ThisMcaseMisMintended MtoMget MstudentsMtoMfocusMonMtheMdifferencesMbetweenMcompaniesMa
nd MtheMvariousMfactorsMthat MhaveMaMbearingMonMtheirMfinancialMreportingMobjectives.MStud
entsMareMasked MtoM prioritizeMtheMfactorsMorMcharacteristicsMthat MareMmost MlikelyMtoMaffect M
eachMcompany‘sMfinancialMreporting.

CompanyMCharacterics

AllMthreeMcompaniesMareMprivateMenterprises.MSignificant McharacteristicsMof MeachMareMasMf
ollows:

BreezeM Inc. SaturnMSoftware Intern’l M Auto M Parts
Business NewMmobileMphoneMnetwork Custom Msoftware Auto MpartsMforMinternational
development auto Mmakers
Owners PrivateMinvestorsMand Mventure Two Mentrepreneurs,Mnot Wealthy Mfamily
capitalists wealthy
OtherM capitalM Egyptian Mfund Pension Mfund— Debt Mthrough Minvestment Mfu
sources pref.MsharesMBank MlineMof Mcre ndsMand Mby MU.S.Mand MCdn.
dit banks
Capital Mrequire CapitalMintensiveMstart-up Salary- Established Mmanufacturer
ments based Moperation; Mworki ; MexpandingMto Mgain Mforei
ngMcapitalMneeded gn
customers
Constraints Egypt Mfund MhasM3 Mboard Mseat Bank Mcovenants: ProbableMdebt Mcovenants
s – restrictionsMon Mdivid
end/salary Mpayouts
– newMdebt
Preferred Mdividend Mrequired
Reporting CRTC Pension Mfund Investment MfundsMand Mbanks
requirements Egypt Mfund; MJapan Mpartner Bank PotentialMnewMcustomers
IPO Not Min MtheMforeseeableMfuture Unlikely Yes,Manticipated Min M2-3 Myears
probable?




©2022 MMcGra w MH ill.M AllMrights Mre serve d
M

2-4 Solutions MM anualMt oMac com pa nyM Inte rme diate M Acc ount ing,M Volume M1 ,M8 th M edi
tion