Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN: 9781285595047
Author: Weil
Publisher: Cengage
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Companies following international accounting standards are permitted to revalue fixed assets above the assets’ historical costs. Such revaluations are allowed under various countries’ standards and the standards issued by the IASB. Liberty International, a real estate company headquartered in the United Kingdom (U.K.), follows U.K. standards. In a recent year, Liberty disclosed the following information on revaluations of its tangible fixed assets. The revaluation reserve measures the amount by which tangible fixed assets are recorded above historical cost and is reported in Liberty’s stockholders’ equity.Liberty InternationalCompleted Investment PropertiesCompleted investment properties are professionally valued on a market value basis by external valuers at the balance sheet date. Surpluses and deficits arising during the year are reflected in the revaluation reserve.Liberty reported the following additional data. Amounts for Kimco Realty (which follows GAAP) in the same year are…
Companies following international accounting standards are permitted to revalue fixed assets above the assets’ historical costs. Such revaluations are allowed under various countries’ standards and the standards issued by the IASB. Liberty International, a real estate company headquartered in the United Kingdom (U.K.), follows U.K. standards. In a recent year, Liberty disclosed the following information on revaluations of its tangible fixed assets. The revaluation reserve measures the amount by which tangible fixed assets are recorded above historical cost and is reported in Liberty’s stockholders’ equity.Liberty InternationalCompleted Investment PropertiesCompleted investment properties are professionally valued on a market value basis by external valuers at the balance sheet date. Surpluses and deficits arising during the year are reflected in the revaluation reserve.Liberty reported the following additional data. Amounts for Kimco Realty (which follows GAAP) in the same year are…
On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2014 financial statements stated in Swiss francs are given below.
GRANT MANAGEMENT CONSULTANTSComparative Balance SheetsJanuary 1 and December 31, 2014
Jan. 1
Dec. 31
Cash and Receivables
20,300
55,200
Net Property, Plant, and Equipment
39,600
36,800
Totals
59,900
92,000
Accounts and Notes Payable
30,200
31,500
Common Stock
19,600
19,600
Retained Earnings
10,100
40,900
Totals
59,900
92,000
GRANT MANAGEMENT CONSULTANTSConsolidated Income and Retained Earnings Statementfor the Year Ended December 31, 2014
Revenues
76,300
Operating Expenses including Depreciation of 2,800 francs
30,400
Net Income
45,900
Dividends Declared and Paid
15,100
Increase in Retained Earnings
30,800
Direct exchange…
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- On January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2014 financial statements stated in Swiss francs are given below. GRANT MANAGEMENT CONSULTANTSComparative Balance SheetsJanuary 1 and December 31, 2014 Jan. 1 Dec. 31 Cash and Receivables 20,300 55,200 Net Property, Plant, and Equipment 39,600 36,800 Totals 59,900 92,000 Accounts and Notes Payable 30,200 31,500 Common Stock 19,600 19,600 Retained Earnings 10,100 40,900 Totals 59,900 92,000 GRANT MANAGEMENT CONSULTANTSConsolidated Income and Retained Earnings Statementfor the Year Ended December 31, 2014 Revenues 76,300 Operating Expenses including Depreciation of 2,800 francs 30,400 Net Income 45,900 Dividends Declared and Paid 15,100 Increase in Retained Earnings 30,800 Direct exchange…arrow_forwardOn January 1, 2014, Trenten Systems, a U.S.-based company, purchased a controlling interest in Grant Management Consultants located in Zurich, Switzerland. The acquisition was treated as a purchase transaction. The 2014 financial statements stated in Swiss francs are given below. GRANT MANAGEMENT CONSULTANTSComparative Balance SheetsJanuary 1 and December 31, 2014 Jan. 1 Dec. 31 Cash and Receivables 20,300 55,200 Net Property, Plant, and Equipment 39,600 36,800 Totals 59,900 92,000 Accounts and Notes Payable 30,200 31,500 Common Stock 19,600 19,600 Retained Earnings 10,100 40,900 Totals 59,900 92,000 GRANT MANAGEMENT CONSULTANTSConsolidated Income and Retained Earnings Statementfor the Year Ended December 31, 2014 Revenues 76,300 Operating Expenses including Depreciation of 2,800 francs 30,400 Net Income 45,900 Dividends Declared and Paid 15,100 Increase in Retained Earnings 30,800 Direct exchange…arrow_forwardIreland Airways recently reported the following items at fair value in recent annual report (in millions). Account Amount Source of Input Cash and Cash equivalents $11,837 Identical Asset /Active Market Commercial Paper 135 Similar Asset/Active Market Other Available for Sale Securities 228 Identical Asset/Active Market Option contracts 109 Significant unobservable inputs Time Deposits 550 Identical Asset/Inactive Market Certificates of Deposit 125 Similar Asset/Inactive Market What is the total dollar amount of level 1 assets? What is the total dollar amount of level 2 assets? What is the total dollar amount of level 3 assets?arrow_forward
- The following cases relate to the valuation of assets. Consider each case independently.a. World-Wide Travel Agency has office supplies costing $1,700 on hand at the balance sheet date. These supplies were purchased from a supplier that does not give cash refunds. World-Wide’s management believes that the company could sell these supplies for no more than $500 if it were to advertise them for sale. However, the company expects to use these supplies and topurchase more when they are gone. In its balance sheet, the supplies were presented at $500.b. Perez Corporation purchased land in 1957 for $20,000. In 2011, it purchased a similar parcelof land for $300,000. In its 2011 balance sheet, the company presented these two parcels ofland at a combined amount of $320,000. c. At December 30, 2011, Lenier, Inc., purchased a computer system from a mail-order sup-plier for $14,000. The retail value of the system—according to the mail-order supplier—was $20,000. On January 7, however, the system…arrow_forwardRecognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting. Which of the following items should be recognised as an asset in the statement of financial position of a company? Select one: a. A highly lucrative contract signed during the year which is due to commence shortly after the year end b. A government grant relating to the purchase of an item of plant several years ago which has a remaining life of four years c. A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company d. A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any lossesarrow_forwardDescribe the following assets and categorise them into real or financial assets giving reasons for such classification: patents, copyrights, lease payments, lease obligations, customer goodwill, a university education, a K100 note, a K1 coin, a share of Larfarge Chilanga Cement, and a bank fixed deposit.arrow_forward
- Declarmen Corporation owns a factory in the United Kingdom. A change in business climate indicates that Declarmen should investigate for possible impairment. Below are date related to the factory’s assets ($ in millions): Book value $ 570 Undiscounted sum of future estimated cash flows 630 Present value of future cash flows 525 Fair value less cost to sell (determined by appraisal) 540 The amount of impairment loss that Declarmen should recognize according to International Financial Reporting Standards is:arrow_forwardAssume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for given problem. Hirsch Company acquired equipment at the beginning of 2017 at a cost of $135,000. The equipment has a five-year life with no expected salvage value and is depreciated on a straight-line basis. At December 31, 2017, Hirsch compiled the following information related to this equipment: Expected future cash flows from use of the equipment . . . . . . . . $116,000Present value of expected future cash flows from use of the equipment . . . . . . . . . . . 100,000Fair value (selling price less costs to dispose) . . . . . . . . . . . . . . . . 96,600 a. Determine the appropriate accounting for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Hirsch would…arrow_forwardTainan company decides to exchange its old machine and $2,600,000 cash for a new machine. The old machine has a book value of $1,400,000 and a fair value of $2,400,000 on the date of the exchange. If this transaction has commercial substance, the cost of the new machine would be recorded atarrow_forward
- Assume that a U.S.-based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes for given problem. Parnell Company acquired construction equipment on January 1, 2017, at a cost of $78,400. The equipment was expected to have a useful life of six years and a residual value of $10,000 and is being depreciated on a straight-line basis. On January 1, 2018, the equipment was appraised and determined to have a fair value of $74,500, a salvage value of $10,000, and a remaining useful life of five years. In measuring property, plant, and equipment subsequent to acquisition under IFRS, Parnell would opt to use the revaluation model in IAS 16.a. Determine the appropriate accounting for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.b. Prepare the entry(ies) that Parnell would make on the…arrow_forwardWhich statements are correct concerning measurement of cost of property, plant and equipment?I. The purchase price of an item of property, plant and equipment is the cash price equivalent at the date of recognitionII. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and total payment is recognized as interest expense over the life of the asset.III. If an item of property, plant and equipment is acquired in exchange for a nonmonetary asset or a combination of monetary and nonmonetary asset, the cost of such item is measured at fair value unless the exchange transaction lacks commercial substance or fair value of either asset received or given up is not reliably determinable.IV. If an entity is able to determine reliably the fair value of both the asset given up and asset received in an exchange, the fair value of the asset given up is used to measure the cost of asset received in exchange.arrow_forwardOne of the main differences between U.S. GAAP and IAS/IFRS is the measurement of property, plant & equipment subsequent to initial recognition. Read IAS 16 and answer the following questions. Provide a list of the references you have used to search this topic. What additional disclosures should be made if property, plant & equipment are stated at revalued amounts? Explain the effect on the company’s financial statements if a company switches from the historical cost principle to the revaluation model? How should this change be accounted for in the financial statements?arrow_forward
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