Intermediate Accounting 9th Canadian Edition - Chapt

25-7 If a loss cannot be accrued in the period when ti is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonable estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments.”

According to AASB 112, main principal of tax effect is to recognize deferred tax asset or deferred tax liability if it is probable that future recovery or settlement of asset or liability makes future tax payments larger or smaller. Requirements are to separately disclose main parts of tax expense, aggregate current and deferred tax relating to items recognized directly in equity, information demonstrating a relationship between tax expense & company’s accounting profit, and certain information relevant to temporary differences and deferred tax assets.

An estimated loss from a loss contingency shall be accrued by a charge to income if both of the following conditions are met:

According to ASC 450-20-25-1, “When a loss contingency exists, the likelihood that the future event or events will confirm the loss or impairment of an asset or the incurrence of a liability can range from probable to remote. As indicated in the definition of contingency, the term loss is used for convenience to include many charges against income that are commonly referred to as expenses and others that are commonly

An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is

(b) Recorded an adjusting entry to record use of $20 of the above supplies. Cash 0/ Net Income -20

In a change from prior accounting under EITF 95-8, the guidance in ASC 805 requires that any arrangement under which payments are forfeited if

* There is an adverse change in legal factors or in the business climate that could affect value of the asset

If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value.

Thus, a capital expenditure which is related only to the sick person and is not related to permanent improvement or betterment of property, if it otherwise qualifies as an expenditure for medical care, shall be deductible; for example, an expenditure for eye glasses, a seeing eye dog, artificial teeth and limbs, a wheel chair, crutches, an inclinator or an air conditioner which is detachable from the property and purchased only for the use of a sick person, etc. Moreover, a capital expenditure for permanent improvement of property may qualify as a medical expense to the extent that the expenditure exceeds the increase in the value of the related property, if the particular expenditure is related directly to medical care. Such a situation could arise, for example, where a taxpayer is advised by a physician to install an elevator in his residence so that the taxpayer's wife who is afflicted with heart disease will not be required to climb stairs. If the cost of installing the elevator is $1,000 and the increase in the value of the residence is determined to be only $700, the difference of $300, which is the amount in excess of the value enhancement, is deductible as a medical expense. If, however, by reason of this expenditure, it is determined that the value of the residence has

If, at year end, 2 months have elapsed, what adjusting entry do you record? 2,000 A. Prepaid Legal Expense Legal Expense 2,000 2,000 B. Legal Expense Prepaid Legal Expense 2,000 Legal Expense 3,000 C. Prepaid Legal Expense 3,000 12,000 D. Prepaid Legal Expense Cash 12,000 [10]BASIC BANK10 - COAE 010 On September 1, your firm incurs a routine $82 expense, mistakenly recording it as follows: Office Expense Accounts Payable 28 28

A deferred tax liability is recognized for temporary differences that will result in taxable amounts in future years. In Packer, Inc’s case, depreciation has been recognized as deferred tax liabilities. Packer uses straight-line depreciation, for tax purposes, the cost of the depreciable recourses may have been deducted faster than that for financial reporting purposes.

“...if the amount of future rebates or refunds cannot be reasonably and reliably estimated, a liability (or deferred revenue) shall be recognized for the maximum potential

c) In relation to the plant, explain the adjustment required to the deferred tax account.

Companies record asset gains and asset losses in an account called Other Comprehensive Income or OCI. If the Accumulated Other Comprehensive Income related to gains and losses is considered to be too large and must be amortized, then it should include amortization of the net gain or loss as component of pension expense only if the beginning of the year the net gain or loss in Accumulated OCI exceeded the corridor approach. Companies should immediately recognize any net income for certain gains and losses--if they arise from a single occurrence which is indirectly related to the operation of the pension plan and not in the ordinary course of the employer 's business.