Surfing the Standards Cases
Surfing the Standards Case 1: Nonmonetary Exchanges
On rare occasions, a company will acquire property, plant, or equipment in a nonmonetary exchange in which two entities exchange one nonmonetary asset for another nonmonetary asset.
Read sections 5, 20, and 30 of ASC 845-10. Describe the accounting treatment for a nonmonetary exchange that has commercial substance. Apply the accounting to the following two independent scenarios
Scenario 1. ALR Sporting Goods, Inc. has four basketball goals it uses for demonstrations. The goals were originally purchased for $750 each.
Scenario 2. Assume that instead of ALR trading its basketball goals the company gives NPR 100 shares of its common stock. The stock has a par value of $10 per share and is currently trading at $35 per share. What is the journal entry for ALR?
Want to see the full answer?
Check out a sample textbook solutionChapter 11 Solutions
Intermediate Accounting (2nd Edition)
- In a sale-leaseback transaction, the owner of an asset sells it and immediately leases it back from the new owner.The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally acceptedaccounting principles.Required:1. Obtain the relevant authoritative literature on disclosure requirements pertaining to a seller-lessee in a saleleasebacktransaction. Use your institution’s Academic Accounting Access to the FASB Accounting StandardsCodification ( www.fasb.org ) or through your school library’s subscription to a research database thatincludes the Codification. What is the specific citation that describes the guidelines for determining the disclosurerequirements in the notes to the financial statements?2. List the disclosure requirements.arrow_forwardIndicate whether each of the following statements is true or false. Companies account for the exchange of non-monetary assets on the basis of the book value of the asset given up or the fair value of the asset received. Under IFRS, all gains on non-monetary exchanges are recognized, regardless of whether the transaction has commercial substance or not.arrow_forward1) Merchandise invested by an entity under a joint operation agreement should include an entry of a)Debit to Joint Operation under the books of the Joint Operators other than the party who invested b)Credit to merchandise inventory of the Joint Operator who contributed merchandise c)Credit to merchandise Inventory of all the Joint Operators d)Credit to Joint Operation under the books of the party investing the merchandise 2) The interest of the retiring or withdrawing partner is usually measured by his capital balance before his retirement or withdrawal adjusted by the following adjustments except a)profit or loss after the date of the partner’s withdrawal or retirement b)changes in the valuation of all assets and liabilities c)errors in net income in prior years d)profit or loss from the operation from the last closing date of the date of his retirement or withdrawal 3)In case of admission of a partner, the first adjustment that need to be prepared is a) The…arrow_forward
- Explain the ‘qualifying asset’ and how do we treat exchange rate differences relating to the acquisition of qualifying assets? Compare and contrast this with the treatment for assets that are not qualifying assets?Give your answer as per AASB 123arrow_forwardChoose the correct. When does gain recognition accompany a business combination?a. When a bargain purchase occurs.b. In a combination created in the middle of a fiscal year.c. In an acquisition when the value of all assets and liabilities cannot be determined.d. When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company.arrow_forwardExplain how a U.S. corporation could hedge net receivables in Malaysian ringgit with a forward contract. Explain how a U.S. corporation could hedge payables in Canadian dollars with a forward contract.arrow_forward
- Choose the correct.The ownership and control of foreign assets such as a manufacturing plant is called: A)a hedge. B)foreign direct investment. C)exposure. D)derivativesarrow_forwardQ12 Which of the following is correct in a regular way purchase (or sale) of a financial asset? Select one or more: a. The trade date should always coincide with the settlement date. b. Settlement should be effected within seven workings days always c. Purchasing and selling of securities should be done according to the terms and conditions stipulated by the traders. d. The asset should be delivered within the time frame established generally by regulation or convention in the marketplace concerned.arrow_forward15 One of the following is not a transaction deemed sale and is therefore not subject to VAT. Which is it? Group of answer choices Distribution or transfer to creditors of goods or properties of a VAT-registered person in payment of debt. Transfer, use or consumption not in the ordinary course of business of goods or properties originally intended for sale or for use in the course of business. Consignment of goods if actual sale is not made within 30 days following the date such goods were consigned. Distribution or transfer to stockholders or investors of goods or properties as share in the profits of a VAT-registered person.arrow_forward
- The cost of a nonmonetary asset acquired in exchange for another nonmonetary asset when the exchange has commercial substance is usually recorded at A) either the fair value of the asset given up or the asset received, whichever one results in the largest gain (smallest loss) to the company. B) the fair value of the asset received if it is equally reliable as the fair value of the asset given up. C) the fair value of the asset given up, and a gain or loss is recognized. D) the fair value of the asset given up, and a gain but not a loss may be recognized.arrow_forwardTreatment of Noncash Exchanges. The acquisition of equipment by assuming a mortgage is a transaction that firms cannot report in their statement of cash flows but must report in a supplemental schedule or note. Of what value is information about this type of transaction? What is the reason for its exclusion from the statement of cash flows? Please explain without copying from another source.arrow_forwardRequired: State what are the presumed advantages of using forward exchange contracts. Calculate the sterling amount that the merchant would receive on these contracts.arrow_forward