SOLUTIONS MANUAL
Intermediate Accounting, Volume 2
ST
Kin Lo, George Fisher
────────────────────────────────────────────────────
UV
4th Edition
IA
?_
AP
PR
TEST BANK
OV
ED
??
, TABLE OF CONTENTS
Solution Manual: Intermediate Accounting Volume 2, 4th Edition
By Kin Lo and George Fisher
ST
CHAPTER 11 Current Liabilities and Contingencies
CHAPTER 12 Non-current Financial Liabilities
UV
CHAPTER 13 Equities
CHAPTER 14 Complex Financial Instruments
CHAPTER 15 Earnings Per Share
CHAPTER 16 Accounting for Income Taxes
IA
CHAPTER 17 Pensions and Other Employee Future Benefits
CHAPTER 18 Accounting for Leases
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CHAPTER 19 Statement of Cash Flows
AP
PR
OV
ED
??
, Chapter 11
Current Liabilities and Contingencies
ST
M. Problems
UV
P11-1. Suggested solution:
Financial or non-financial
Item Liability obligation? Explanation
1. Accounts payable F
IA
2. Warranties payable N Obligation is to deliver
goods or services
3. USD bank loan F
4. Bank overdraft F
?_
5. Sales tax payable N Obligation is not contractual
in nature
6. Notes payable F
7. Unearned revenue N Obligation is to deliver
goods or services
AP
8. Finance lease obligation F
9. HST payable N Obligation is not contractual
in nature
10. Bank loan F
11. Bonds payable F
PR
12. Obligation under customer N Obligation is to deliver
loyalty plan goods or services
13. Income taxes payable N Obligation is not contractual
in nature
OV
P11-2. Suggested solution:
To be classified as a liability, the item must: i) be a present obligation; ii) have arisen from a
past event; and iii) be expected to result in an outflow of economic benefits. This is an “and”
situation as all three criteria must be present before a liability is recorded. The precise amount
ED
of the obligation need not be known, provided that a reliable estimate can be made of the
amount due. Provisions are liabilities in which there is some uncertainty as to the timing or
amount of payment.
??
Copyright © 2020 Pearson Canada Inc.
, ISM for Lo/Fisher, Intermediate Accounting, Vol. 2, Fourth Edition
Trade accounts payable meet the criteria of a liability as set out below:
* Present obligation: The debtor is presently contractually obliged to pay for goods or services
received.
ST
* Past event: The trade payable arose from a good or service the debtor previously received or
consumed.
* Outflow of economic benefits: Trade payables are typically settled in cash—an outflow of
economic benefits.
UV
P11-3. Suggested solution:
a. Provisions are liabilities in which there is some uncertainty as to the timing or amount of
payment.
b. Financial liabilities are contracts to deliver cash or other financial assets to another party.
They differ from non-financial liabilities as the latter category is typically settled through the
IA
provision of goods or services.
c. A non-exhaustive list of financial liabilities includes accounts payable; bank loans; notes
payable; bonds payable; and finance leases. A non-exhaustive list of non-financial
obligations includes warranties payable; unearned revenue; and income taxes payable.
?_
P11-4. Suggested solution:
a. The three broad categories of liabilities are:
AP
1. Financial liabilities held for trading
2. Other financial liabilities
3. Non-financial liabilities
b.
* Held-for-trading liabilities are initially recognized at fair value.
PR
* Other financial liabilities are initially reported at fair value minus the transaction costs
directly resulting from incurring the obligation.
* The initial measurement of non-financial liabilities depends on their nature. For instance,
warranties are recorded at management’s best estimate of the downstream cost of meeting
the entity’s contractual obligations, while prepaid magazine subscription revenue is
OV
valued at the consideration initially received.
c.
* Held-for-trading liabilities are subsequently recognized at fair value.
* Other financial liabilities are subsequently measured at amortized cost using the effective
rate method.
* Non-financial liabilities are subsequently measured at the initial obligation less the
ED
amount earned to date or satisfied to date through performance. For example, a publisher
that received $750 in advance for a three-year subscription and has delivered the
magazine for one year would report an obligation of $500 ($750 – $250).
??
Copyright © 2020 Pearson Canada Inc.
Intermediate Accounting, Volume 2
ST
Kin Lo, George Fisher
────────────────────────────────────────────────────
UV
4th Edition
IA
?_
AP
PR
TEST BANK
OV
ED
??
, TABLE OF CONTENTS
Solution Manual: Intermediate Accounting Volume 2, 4th Edition
By Kin Lo and George Fisher
ST
CHAPTER 11 Current Liabilities and Contingencies
CHAPTER 12 Non-current Financial Liabilities
UV
CHAPTER 13 Equities
CHAPTER 14 Complex Financial Instruments
CHAPTER 15 Earnings Per Share
CHAPTER 16 Accounting for Income Taxes
IA
CHAPTER 17 Pensions and Other Employee Future Benefits
CHAPTER 18 Accounting for Leases
?_
CHAPTER 19 Statement of Cash Flows
AP
PR
OV
ED
??
, Chapter 11
Current Liabilities and Contingencies
ST
M. Problems
UV
P11-1. Suggested solution:
Financial or non-financial
Item Liability obligation? Explanation
1. Accounts payable F
IA
2. Warranties payable N Obligation is to deliver
goods or services
3. USD bank loan F
4. Bank overdraft F
?_
5. Sales tax payable N Obligation is not contractual
in nature
6. Notes payable F
7. Unearned revenue N Obligation is to deliver
goods or services
AP
8. Finance lease obligation F
9. HST payable N Obligation is not contractual
in nature
10. Bank loan F
11. Bonds payable F
PR
12. Obligation under customer N Obligation is to deliver
loyalty plan goods or services
13. Income taxes payable N Obligation is not contractual
in nature
OV
P11-2. Suggested solution:
To be classified as a liability, the item must: i) be a present obligation; ii) have arisen from a
past event; and iii) be expected to result in an outflow of economic benefits. This is an “and”
situation as all three criteria must be present before a liability is recorded. The precise amount
ED
of the obligation need not be known, provided that a reliable estimate can be made of the
amount due. Provisions are liabilities in which there is some uncertainty as to the timing or
amount of payment.
??
Copyright © 2020 Pearson Canada Inc.
, ISM for Lo/Fisher, Intermediate Accounting, Vol. 2, Fourth Edition
Trade accounts payable meet the criteria of a liability as set out below:
* Present obligation: The debtor is presently contractually obliged to pay for goods or services
received.
ST
* Past event: The trade payable arose from a good or service the debtor previously received or
consumed.
* Outflow of economic benefits: Trade payables are typically settled in cash—an outflow of
economic benefits.
UV
P11-3. Suggested solution:
a. Provisions are liabilities in which there is some uncertainty as to the timing or amount of
payment.
b. Financial liabilities are contracts to deliver cash or other financial assets to another party.
They differ from non-financial liabilities as the latter category is typically settled through the
IA
provision of goods or services.
c. A non-exhaustive list of financial liabilities includes accounts payable; bank loans; notes
payable; bonds payable; and finance leases. A non-exhaustive list of non-financial
obligations includes warranties payable; unearned revenue; and income taxes payable.
?_
P11-4. Suggested solution:
a. The three broad categories of liabilities are:
AP
1. Financial liabilities held for trading
2. Other financial liabilities
3. Non-financial liabilities
b.
* Held-for-trading liabilities are initially recognized at fair value.
PR
* Other financial liabilities are initially reported at fair value minus the transaction costs
directly resulting from incurring the obligation.
* The initial measurement of non-financial liabilities depends on their nature. For instance,
warranties are recorded at management’s best estimate of the downstream cost of meeting
the entity’s contractual obligations, while prepaid magazine subscription revenue is
OV
valued at the consideration initially received.
c.
* Held-for-trading liabilities are subsequently recognized at fair value.
* Other financial liabilities are subsequently measured at amortized cost using the effective
rate method.
* Non-financial liabilities are subsequently measured at the initial obligation less the
ED
amount earned to date or satisfied to date through performance. For example, a publisher
that received $750 in advance for a three-year subscription and has delivered the
magazine for one year would report an obligation of $500 ($750 – $250).
??
Copyright © 2020 Pearson Canada Inc.
