FINAL EXAMINATION

Date: December 12, 2024 School Year: 2024-2025

Course Code: ACCT-2106 Section: FA801

Professor: M. Pilon Faculty of: Education & Professional Studies

Number of 19 Time: 18:00-21:00 (3 Hours)

Pages:

SPECIAL INSTRUCTIONS:

Write your answers directly on the exam copy.

NAME: Tyler Lemieux

Final Examination ACCT-2106 Page 2

QUESTION 1 4 POINTS 8 MINUTES

Presented below are three revenue recognition situations:

a) Bliss sells goods to Jusu for $ 10,000 payment due at delivery.
b) Bliss sells goods on account to Saanich for $ 23,000 payment due in 30 days.
c) Bliss sells goods to Nourish for $ 50,000 due in two instalments: the first instalment payable
in 20 months, and the second payment due 4 months later. The present value of the future
payments is $ 47,000.

Instructions
For each of these transactions above, describe how the transaction price should be calculated and
when revenue should be recognized.

A) The transaction price is

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QUESTION 2 6 POINTS 10 MINUTES

Jets Ltd. contracted to build a high-rise for $ 6,000,000. Construction began in 2020 and is
expected to be completed in 2020. Data for 2020 and 2021 are:
2020 2021
Costs incurred.............................................................. $ 900,000 $ 1,700,000
Estimated costs to complete......................................... 3,600,000 2,400,000

Instructions
Using the percentage-of-completion method and the cost-to-cost basis,
a) How much gross profit should be reported for 2020? Show your calculation.
b) How much gross profit should be reported for 2021? Show your calculation.
c) Prepare the journal entry to record the revenue and gross profit for 2021.
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QUESTION 3 2 POINTS 5 MINUTES

A trial balance before adjustment included the following:

Debit Credit
Accounts receivable................................................ $120,000
Allowance for doubtful accounts............................. $730
Sales....................................................................... 510,000
Sales returns and allowances................................... 8,000

Instructions
Prepare adjusting journal entries assuming that the estimate of uncollectibles is determined based
on 5% of gross accounts receivable.
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QUESTION 4 5 POINTS 10 MINUTES

An audit of the inventory records of Missouri Inc. identified a number of errors. These errors are
summarized in Exhibit A:

EXHIBIT A
Net Income
Year Description of Error
Reported
2016 $120,000 Overstatement of ending inventory $11,000
2017 $95,000 Understatement of ending inventory $1,500
2018 $99,000 Understatement of ending inventory $0

Instructions
Calculate the corrected net income amounts for each of the three years.
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QUESTION 5 2 POINTS 5 MINUTES

The Malibu Shop shows the following data related to item Y27:
Inventory, February 1 100 units @ $7.00
Purchase, February 9 200 units @ $7.60
Purchase, February 19 150 units @ $7.90
Inventory, February 28 200 units

Instructions
Using the FIFO cost formula, what value should be assigned to the ending inventory of item
Y27?
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QUESTION 6 4 POINTS 10 MINUTES

The controller of Utah Corp. has provided you with the following information relating to its
inventory:
Date Cost Lower of cost and NRV
Dec 31/19 $457,000 $410,000
Dec 31/20 $615,000 $555,000

Utah uses the periodic inventory system, and records its inventory at cost. An allowance account
is adjusted at the end of each year to adjust the value of the inventory to the lower of cost and
NRV.

Instructions
Prepare the journal entries that Utah would have prepared for its 2019 and 2020 year ends,
assuming that 2019 was its first year of operations.
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QUESTION 7 5 POINTS 10 MINUTES

Ohana Company uses the gross profit method to estimate inventory for monthly reports.
Information follows for the month of November:
Inventory, Nov 1 $ 978,000
Purchases 691,000
Freight-in 47,000
Sales 1,450,000
Sales returns 67,600
Purchase discounts 14,100

Instructions
Calculate the estimated inventory at November 30, assuming that the gross profit is 30% of
sales.
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QUESTION 8 10 POINTS 20 MINUTES

On October 1, Whiteside Ltd. purchased a 7% bond with a face value of $ 1,000 for trading
purposes, accounting for the investment at fair value through net income. The bond was priced at
1.023 to yield Whiteside 5%, and pays interest annually each October 1. Whiteside has a
December 31 year end, and at this date, the bond’s fair value was $ 1,050. Assume Whiteside
applies IFRS and follows a policy of not reporting interest income separately from investment
income.

Instructions
a) Prepare Whiteside’s entry for the purchase of the investment.
b) Prepare Whiteside’s entry for the December 31 interest accrual.
c) Prepare Whiteside’s entry for the year-end fair value adjustment.
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QUESTION 9 10 POINTS 20 MINUTES

On January 1, 2020, Genevieve Ltd. purchased 8%, $ 100,000 (par value) bonds for $ 108,530.
The bonds were purchased to yield 6%. Interest is paid on July 1 and January 1 and the bonds
mature on January 1, 2025. Genevieve uses the amortized cost method and the effective-interest
method to amortize the premium. Genevieve has a year end of December 31 and follows ASPE.

Instructions
a) Prepare the journal entry to record the purchase.
b) Prepare the journal entries for the receipt of interest and amortization of the premium for the
remainder of 2020. Round all values to the nearest dollar.
c) What is the carrying value of the investment at the end of 2021?
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QUESTION 10 8 POINTS 16 MINUTES

Julep Corporation purchases a 25% interest in Orange Corporation on January 2, 2020, for $
800. At that time, the carrying amount of Orange’s net assets was $ 2,952. Any excess of the
cost of the investment over Julep’s share of Orange’s carrying amount can be attributed to
unrecorded intangibles with a useful life of 20 years. Orange declared and paid a dividend of $
16 and reported net income of $ 52 for its year ended December 31, 2020.

Instructions
Prepare Julep’s 2020 entries to record all transactions and events related to the investment in its
associate. Assume Julep is a publicly accountable enterprise that applies IFRS.
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QUESTION 11 5 POINTS 10 MINUTES

Eritrea Ltd. is expanding its operations. Due to the expansion, they incurred the following costs
during the fiscal period when they constructed a new factory:
Direct labour...................................................................... 70,000
Loan interest to finance expansion...................................... 3,000
Architectural drawings....................................................... 15,000
Purchase of company car for the new plant manager.......... 44,000
Direct material for factory.................................................. 81,000
Allocation of overhead based on labour
hours worked on factory.................................................. 58,000
Imputed interest on lost opportunity costs.......................... 9,000

Instructions
Which of these costs should be included in the cost of the new factory?
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QUESTION 12 6 POINTS 12 MINUTES

Swift Corporation is an international provider of freight services that follows IFRS. Its fleet of
vehicles includes a truck that is carried in its books as "VC1-016." This truck was purchased two
years ago for $ 150,000 and has been depreciated on a straight-line basis. By December 31,
2020, its book value (carrying value) is $ 97,000.

As part of its commitment to safety and as required by its insurer, the company has a policy to
overhaul its trucks after every 50,000 km. The associated costs of the overhauls are tracked in
separate accounts.

At December 31, 2020, the balances for VC1-016 are as follows:

Overhauls # 1 – 5:
Accumulated Depreciation:......................................... $0
Overhaul # 6:
Cost............................................................................. $ 20,000
Less accumulated depreciation:................................... (16,400)
Book value.................................................................. $ 3,600

On January 1, 2021, after the driver had reported problems with the truck's engine, a decision
was made to do an early overhaul (i.e., 9,000 km prior to the next scheduled overhaul). The
overhaul was completed on January 7, 2021, for $ 28,000 cash.

Because of a slowdown in the economy, the truck only operated for 21,000 km for the remainder
of 2021.

Instructions
Prepare the appropriate journal entries for 2021 relating to the truck’s overhaul.
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QUESTION 13 4 POINTS 10 MINUTES

JB Corporation purchased equipment costing $135,000 on January 1, 2018. At that time the
useful life of the equipment was estimated to be 12 years and the residual value was estimated to
be $7,500. Depreciation up to December 31, 2019 has been recorded using the straight-line
method and the company operates on a calendar year basis. On January 1, 2020, the estimated
useful life was revised to a total of 10 years and the residual value was revised to $8,000.

Instructions
Prepare the journal entry to record the depreciation expense for 2020. Show all calculations.
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QUESTION 14 4 POINTS 8 MINUTES

Cougar Corp.'s balance sheet includes the following asset:

Equipment................................................. $95,000
Less: accumulated depreciation................. (25,000)
Book value (carrying amount)................... $70,000

After performing its annual review for impairment, Cougar obtains the following data:
Asset’s value in use................................... $58,000
Fair value less disposal costs..................... 62,000

Instructions
Assuming Cougar uses the rational entity impairment model,
a) Calculate the recoverable amount.
b) Calculate the impairment loss.
c) Prepare the entry to record the impairment loss.
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QUESTION 15 6 POINTS 12 MINUTES

Answer each of the following questions.

1. On January 2, 2019, a machine was purchased for $180,000. It has an estimated useful life
of ten years and an estimated residual value of $14,000. Depreciation for 2020, using the
straight-line method, is $_____________.
2. A vehicle purchased for $50,000 has an estimated useful life of five years and a residual
value of $3,800. It is expected to be driven 210,000 kilometres over its useful life. The asset
was driven 45,000 kilometres in the second year. Depreciation for the second year, using the
units of production method, is $______________.
3. A machine costing $72,000, with an estimated useful life of five years and a residual value
of $12,000, is depreciated by the straight-line method. This asset is sold for $50,000 at the
end of the second year of use. The gain or loss on the disposal is $___________.

Instructions
Answer each of the questions above. Show all calculations.
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QUESTION 16 3 POINTS 6 MINUTES

Instructions
Explain the three main characteristics of intangible assets. Is goodwill an intangible asset? Why,
or why not? Explain.
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QUESTION 17 4 POINTS 8 MINUTES

Carmanah Industries Ltd. Is a company in the high-technology industry. Carmanah has been
working on developing a new solar panel technology. The technology meets all of the six criteria
required in order to capitalize development costs. During 2020, Carmanah incurred the
following costs related to research and development:
Rent of facility $ 250,000
Salaries of research staff 290,000
Legal costs to obtain new patent for technology 40,000
Legal costs of defending new patent in court 36,000
Materials consumed in manufacture of prototypes 13,100
Consulting fees paid for general research 45,200
Indirect costs related to research and development 9,700

Instructions
Calculate the amount that Carmanah would be allowed to capitalize as an intangible asset for
2020, assuming that Carmanah follows IFRS.
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END OF EXAMINATION