Solution Manual for Modern Advanced Accounting in Canada 9th Edition Hilton | Complete Chapter 1-4 Cases & Problems

COMPLETE SOLUTION MANUAL FOR MODERN
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ADVANCED ACCOUNTING IN CANADA 9TH ED
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ITION HILTON MURRAY,
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HERAUF DARRELL
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Chapter 1 Conceptual k k




& Case Analysis
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Frameworks for Financial Reporting k k k




A brief description of the major points covered in each case and problem. CA
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SES

Casek1-1
Inkthiskcase,kstudentskarekintroducedktokthekdifferencekinkaccountingkforkR&DkcostskbetweenkI
FRSkandkASPEkandkaskedktokprovidekargumentsktoksupportkthekdifferentkstandards.


Casek1-2k (adaptedkfromkakcasekpreparedkbykPeterkSecord,kSaintkMary’skUniversity)
Inkthiskrealklifekcase,kstudentskarekaskedktokdiscusskthekmeritskofkhistoricalkcostskvs.kreplacementkc
osts.k Actualknotekdisclosurekfromkakcompany’skfinancialkstatementskiskprovidedkaskbackgroundkm
aterial.


Casek1-3k (adaptedkfromkakcasekpreparedkbykPeterkSecord,kSaintk Mary’skUniversity)

Copyrightkk2019kMcGraw-HillkEducation.kAllkrightskreserved.
SolutionskManual,kChapterk6 1

,AkCanadiankcompanykhaskjustkacquiredkaknon-
controllingkinterestkinkakU.S.kpublickcompany.kItkmustkdecidekwhetherktokusekIFRSkorkU.S.kGAAPkfo
rkthekU.S.ksubsidiary.kFinancialkstatementkinformationkiskprovidedkunderkIFRSkandkU.S.kGAAP.k Th
ekreasonskforksomekofkthekdifferenceskinknumberskmustkbekexplainedkandkankopinionkprovidedkaskt
okwhichkmethodkbestkreflectskeconomickreality.


Casek1-4
ThiskcasekiskadaptedkfromkakCPAkCanadakcase.k Akprivatekcompanykiskplanningktokgokpublic.kAnaly
siskandkrecommendationskarekrequiredkforkaccountingkissueskrelatedktokpurchasekandkinstallationk
ofknewkinformationksystem,krevenuekrecognition,kconvertiblekdebentureskandkdoubtfulkaccountskre
ceivable.


Casek1-5
ThiskcasekiskadaptedkfromkakCPAkCanadakcase.k Akprivatekcompanykiskplanningktoktransitionk fromk
ASPEktokIFRS.kAnalysiskandkrecommendationskarekrequiredkforkaccountingkissueskrelatedktokconv
ertiblekdebentures,kunusualkitem,krevenuekrecognition,kcontingencykandkimpairment.




Copyrightkk2019kMcGraw-
HillkEducation.kAllkrightskreserved.k2 ModernkAdvancedkAccountingkinkCanada,kNinthkEdition

,PROBLEMS

Problemk1-1 (40kmin.)
Aksinglekassetkiskacquired.kStudentskarekaskedktokpreparekandkcomparekfinancialkstatementknumb
erskduringktheklifekofkthekassetkusingkbothkakhistoricalkcostkandkakcurrentkvaluekmodel.


Problemk1-2 (40kmin.)
DetailskofkakEuropeankcompanykthatkreportskusingkIFRSkarekgivenkalongkwithkspecifickdetailskrelati
ngktokcertainkaccountkbalances.k Studentskarekaskedktokshowkhowkthesekbalanceskshouldk bekrepo
rtedkunderk1)kASPEkandk2)kIFRSkusingkthekfactskprovided.k StudentskarekalsokaskedktokreconcilekN
etkIncomekandkShareholders`kEquitykfromkIFRSktokASPE.


Problemk1-3 (50kmin.)
Akprivatekcompanykplansktokconvertktok IFRSkgokpublickwithink5kyears.kItkwantsktokknowkthek impactk
onknetkincomekandkshareholders’kequitykifkitkconvertskfromkASPEktokIFRSkforkimpairedkloans,kintere
stkcosts,kactuarialkgains,kcompoundkfinancialkinstrumentkandkincomektaxes.


Problemk1-4 (50kmin.)
Whilektakingkthekrolekofkakfinancialkanalyst,kthekstudentkuseskverticalkandkhorizontalkanalysiskandkr
atiosktokanalysekandkinterpretkthekprofitability,ksolvencykandkliquiditykofkakprivatekcompany.


Problemk1-5 (25kmin.)

AkprivatekcompanykplansktokconvertktokIFRS.kItkwantsktokknowkthekimpactkonkthreekkeykratioskifkitkco
nvertskfromkASPEktokIFRSkforkimpairedkloans,kcapitalizationkofkinterestkandkactuarialkgains/losses.


Problemk1-6 (50kmin.)
AkprivatekcompanykplansktokconvertkfromkASPEktokIFRSkandkwantsktokknowkthekimpactkonkthreekke
ykratioskifkitkconvertskfromkASPEktokIFRSkforkimpairmentklosses,kconvertiblekbondskandkincomektax
es.




Copyrightkk2019kMcGraw-HillkEducation.kAllkrightskreserved.
SolutionskManual,kChapterk6 3

, SOLUTIONS TO REVIEW QUESTIONS
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1. Therekarektimeskwhenk externalkuserskmaykwantkfinancialkreportskthatkdoknotkfollowkGAAP.k Fork
example,kuserskmaykneedkfinancialkstatementskusingknon-
GAAPkaccountingkpolicieskrequiredkforklegislativekorkregulatorykpurposes,korkforkcontractkcomp
liance.kAkprospectiveklenderkmaykwantktokreceivekakbalanceksheetkwithkassetskreportedkatkfairkv
aluekratherkthankhistoricalkcost.kAccountantskhavekthekskillskandkabilitiesktokprovidekfinancialkinf
ormationkinkakvarietykofkformatskorkusingkakvarietykofkaccountingkpolicies.kWhenkthekfinancialkst
atementskuseknon-
GAAPkaccountingkpolicies,kthekaccountingkpolicieskmustkbekdisclosedk inkthek notesk tokthekfinan
cialkstatements.kThekaccountant’skreportkwouldkmakekreferencektokthesekaccountingkpolicies.
2. Thekthreekmainkareaskwherekjudgmentkneedsktokbekappliedkarekaskfollows:
- Choosingkaccountingkpolicieskthatkarekappropriatekforkthekcompany’sksituation
- Makingk estimatesk tok accuratelyk reflectk thek company’sk financialk positionk andk resultsk ofk
operations
- Decidingkwhatktokdisclosekandkhowktokdisclosekitkinktheknotesktokthekfinancialkstatements.
3. ThekGAAP-
basedkfinancialkstatementskarekpreparedkprimarilykforkthekbenefitkofkexternalkusers.kThekfinanci
alkstatementskprovidekaksummarykofkthekfinancialkpositionkandkresultskofkoperationskforkthekco
mpany.kManagementkhaskaccessktokthekdetailedkinformationkavailablekwithinkthekcompany.kTh
erefore,kthekformalkfinancialkstatementskshouldkgivekpriorityktokthekneedskofkthekexternalkusers.
4. ThekmainkreasonkthekAccountingkStandardskBoardkdecidedktokcreatekakseparateksectionkofkthek
CPAkCanadakHandbookkforkprivatekenterpriseskwasktokaddresskthekcost/benefitkdiscrepancykw
ithkrespectktoksmallerkprivatekcompanies’kabilityktokcomplykwithkGAAP.k GAAPkhaskbecomekincr
easinglykcomplexkandkforksmallerkprivatekenterpriseskthiskoftenkmeanskthatkthekcostkofkcomplyi
ngkwithksuchkrequirementskoutweighskthekbenefitkreceivedkfromkcompliance.k Ink2002,kthekAcS
Bkadoptedkdifferentialkreporting,kwhichkallowedkprivatekenterpriseskchoiceskwithkthekrespectktok
certainkcomplexkaccountingkstandardsk(e.g.kthek optionktokusekthekcostkmethodkforkinvestment
skthatkwouldkotherwisekrequirekthekequitykmethod).kInk2009,kthekAcSBkdecidedktokcreatekakself-
containedksetkofkstandardskforkprivatekenterprises.kThesekstandardskwerekeffectivekforkfiscalkpe
riodskbeginningkonkorkafterkJanuaryk1,k2011.
5. Therek arek ak fewk reasonsk whyk ak privatek companyk wouldk wantk tok complyk withk IFRSk even
thoughkitk isknotkrequiredktokdok so.k Itkmaykhavekplansktokbecomekpubliclyk listedk atksomek point


Copyrightkk2019kMcGraw-
HillkEducation.kAllkrightskreserved.k4 ModernkAdvancedkAccountingkinkCanada,kNinthkEdition