Exam 3: Accrual Accounting

IFRS identifies a number of criteria to determine whether a liability should be classified as current. A liability that satisfies any one of these criteria must be classified as current. For the following list of criteria, identify whether each one is relevant for the classification of a liability as current instead of non-current.

The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2013. A machine was purchased on January 1, 2011, at a cost of $150,000. The machine has an estimated useful life of 10 years and a residual value of $9,000. What was booked as depreciation expense in fiscal 2011?

What is a "deferral"?

Which statement is correct about accrual accounting?

Under the IFRS Framework, what general information is useful for the decision making needs of lenders and investors?

Why are excessive accruals a concern for accounting and financial reporting?

Which of the following would be accounted for as correction of an error?

IFRS requires certain line items to be presented in the statement of comprehensive income (rather than just disclosed in the notes). Identify whether the following items are required in the statement of comprehensive income.

Explain how changes in accounting policies, changes in accounting estimates and errors are accounted for under the accrual basis of accounting.

Information on the income statement is categorized into

The following information was provided from the records of Konstruct Inc, which began operations in the current year: What were the company's expenses for the year?

The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2013. A machine was purchased on January 1, 2011, at a cost of $150,000. The machine has an estimated useful life of 10 years and a residual value of $9,000. What adjustment is needed for fiscal 2012?

The following event occurred after the company's year-end but before the completion of the audit. For this subsequent event, determine whether the event: •requires an adjustment to the year-end financial statements, •requires note disclosure, or •requires neither adjustment to recognized amounts nor disclosure. The company experiences a major labour strike. Workers are still on strike when the audit is finished. Does your answer change if this strike might force the company into bankruptcy? (Justify your recommendation).

Sing Songs Ltd. started operations on January 1, 2010. During its first year of operations, the company had a choice of accounting policies: Assume that the company selected Accounting Option 2. Using the following information about activities for 2010-2012, derive the net income for each year:

What is an "accrual"?

General Limited's income statement reported the following for last year: Which of the following statements is correct about the income statement?

What is the significance of the subsequent events period for accrual accounting?

Determine the missing amounts:

JP Corporation had net income of $1,000,000 for 2011. After issuing its financial statements, it realized that it had failed to include inventory from one of its small warehouses for several years. Specifically, it forgot to include $20,000 on December 31, 2010, and $30,000 on December 31, 2011. Which of the following is true regarding JPs 2011 net income?

During the past year, Easy Supplies Ltd.'s assets decreased $33,000, its liabilities decreased $41,000, its share capital increased $5,000, and the company recorded net income of $12,000. What was the amount of dividends declared?