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ADM 4215 Advanced Financial Accounting

Question

Answered

Question:

Question One (14 Marks, 20 Minutes)

Trinity Ltd. is a privately owned medical technology company based in Moncton, NB that will be expanding substantially in the near future. It currently reports using ASPE but is considering moving to IFRS in the current year.

Based on drafts statements prepared using ASPE, preliminary accounts on December 31, Year-7, its Net Income is $150,000 and its Total Shareholder Equity is $3,000,000. You have identified the following areas in which Trinity’s accounting principles differ between ASPE and IFRS:

1.Development costs - Trinity incurred research and development costs of $45,000 in January 1, Year-7. 30% of these costs were related to development activities that met the criteria for capitalization as an intangible asset. The newly developed product was brought to market in March 01, Year-7 and is expected to generate sales revenue for 10 years.

2.Property, Plant and Equipment - Trinity acquired equipment at the beginning of Year-5 at a cost of $25,000. The equipment has an estimated useful life if 10 years, an estimated residual value of $5,000 and is being depreciated on a straight-line basis. On January1, Year-7, the equipment was appraised and determined to have a fair value of $18,000. It’s estimated useful life and residual value did not change. The company could adopt the revaluation option in IAS 16 to periodically revalue the equipment at fair value subsequent to acquisition.

3.Asset Impairment - Trinity acquired equipment at the beginning of Year-6 at cost of $100,000. The equipment has a five-year life and no expected residual value and is depreciated on a straight line basis. As at January 1, Year-7, Trinity compiled the following information related to the equipment:

Expected future cash flows from use of equipment

$85,000

Present value of expected future cash flows from use of equipment

75,000

Net realizable Value

72,000

Question Two (16 Marks, 25 Minutes)

Company Yin Corp. paid $300,000 for a 30% interest in Company Yan on January 1, Year 6. During Year 6, Company Yan paid dividends of $100,000 and reported other comprehensive income (OCI) of $20,000 and profit as follows:

Profit before discontinued operations:    $350,000
Discontinued operations loss (net of tax):      $40,000         
Profit                    $310,000

Company Yin profit for Year-6 consisted of $900,000 in sales, expenses of $110,000 and income tax expense of 330,000 and its investment income from Company Yan. Both companies have a tax rate of 40%.

Required:

(i)Assume that Company Yin reports its investment using the Equity Method. Prepare all the journal entries necessary to account for Yin’s investment for Year 6. Also, Determine the correct balance in Yin’s investment account at December 31, Year-6.

(ii)Assume that Company Yin reports its investment using the Cost Method. Prepare all the journal entries necessary to account for Yin’s investment for Year 6.

(iii)Prepare an income statement for Yin as at December 31, Year 6 under the Equity Method.

ADM 4215 Advanced Financial Accounting

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MBA 503 Milestone One Guidelines and Rubric

For this assignment, due in Module Four, you will submit both a horizontal and vertical analysis of Starbucks’ accounts receivable, fixed assets, and debt financing. Use basic financial analysis to examine any horizontal and any vertical changes in Starbucks’ accounts receivable, fixed a ...

View Answer
Q

Five-year annual statement of STARBUCKS

• Starbucks location serve hot and cold beverages, whole-bean coffee, micro ground instant coffee, full-leaf teas, pastries and snacks. • Most stores also sell pre-packaged food items, hot and cold sandwiches and items such as mugs and tumblers. • Starbucks evening’s locations ...

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Mackey Biotechnical

Mackey Biotechnical, Inc., develops, manufactures, and sells pharmaceuticals. Significant research and development (R&D) expenditures are made for the development of new drugs and the improvement of existing drugs. During 2017, $180 million was spent on R&D. Of this amount, on January 1, 201 ...

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