Intermediate Financial Accounting I - ADMN 3221H

Accounting Assignment #2

Professor Wallace Fall 2014
1


Due Date: Tuesday September 30
th
(by 1:50 PM)

! The assignment is marked out of 90
! It accounts for 10% of your total grade
! Discussion questions should be typed, double-spaced
! Accounting questions should be done on accounting paper [using pen (blue or black ink) or
pencil]
! Staple assignment in top left-hand corner
! Ensure your name and student number are clearly visible on the assignment

1. Other comprehensive income is a category of comprehensive income that is made up of specific
gains and losses that are reported separately after net earnings under IFRS. These concepts do
not exist under ASPE. Rather ASPE only requires the reporting of net income.
a. Discuss the rationale for excluding other comprehensive income items from ASPE. Use
examples of items that are currently reported under other comprehensive income and
discuss their treatment under ASPE. [3 marks]
b. Under IFRS, earnings per share (EPS) is calculated using net earnings. Discuss the pros and
cons of calculating EPS on comprehensive income instead. [2 marks]

2. Champlain Lte (Question to be answered on accounting paper) [40 marks]

The following account balances were included in Champlain Ltes adjusted trial balance at June 30,
2013:

Advertising Exp. (sales) $28,930 Maintenance Exp. (office) 9,130
Cost of goods sold 1,071,770 Miscellaneous expense
(office)
6,000
Depreciation (office
furniture & equipment)
7,250 Miscellaneous Expenses
(sales)
4,715
Depreciation overstatement
due error - June 2012 (net
of tax)
17,700 Salary & wages (sales) 56,260
Depreciation on sales
equipment
4,980 Salary & wages (office) 7,320
Dividends declared on
common shares
32,000 Sales Commission Exp. 97,600
Dividends declared on
preferred shares
9,000 Sales Discounts 31,150
Dividend Revenue 38,000 Sales returns & allowances 62,300
Entertainment Exp. (sales) 14,820 Sales Revenue $1,928,500
Freight-out 21,400 Supplies Expense (office) 3,450
Interest expense 18,000 Supplies Expense (sales) 4,850
Income tax 133,000 Telephone Exp.(sales) 9,030
Maintenance Exp. (sales) 6,200 Telephone expense (office) $2,820

Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2

Professor Wallace Fall 2014
2

During 2013 Champlain incurred production salary and wage costs of $710,000, consumed raw
materials and other production supplies of $474,670, and had an increase in work-in-process and
finished goods inventories of $112,900. The Retained Earnings account had a balance of $292,000 at
June 30, 2013, before closing. There are 180,000 common shares outstanding. Assume Champlain has
elected to adopt IFRS. (Hint: production payroll and materials costs reduced by the increase in ending
work-in-process and finished goods inventories = the cost of goods sold).
Required:
A. Prepare an income statement for the year ended June 30, 2013, using the multiple-step
format and showing expenses by function [20 marks]
B. Prepare an income statement for the year ended June 30, 2013, using the single-step
format and showing expenses by nature [15 marks]
C. Prepare the retained earnings portion of the statement of changes in equity for the
year ended June 30, 2013 [5 marks]


3. CCC Corporation [question to be answered on accounting paper]
CCC Corporation
Unadjusted Trial Balance
December 31, 2013
($s)

Debit Credit
Cash & Cash Equivalents $123,500
Accounts Receivable [net] 81,000
Inventory 4,000
Equipment 50,000
Accumulated Depreciation 25,500
Building [historical cost] 290,000
Accumulated Depreciation 21,750
Accounts Payable 34,500
Salary Payable 1,000
Unearned Revenue 9,000
Income Taxes Payable 9,000
Dividends Payable 10,000
Mortgage 140,000
Common Shares 150,000
Retained Earnings 120,000
Consulting Revenue 56,500
Book Sales 8,250
Cost of Goods Sold 4,000
Insurance expense 12,000
Salary expense 5,500
Utilities expense 13,500
Interest expense 2,000
Totals $585,500 $585,500

Additional Information:
Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2

Professor Wallace Fall 2014
3


A. The annual insurance policy of $12,000 was paid in February 2013. The policy is effective
March 1, 2013. When the invoice was paid in February 2013, the bookkeeper made the
following entry:
Dr. insurance expense 12,000
Cr. Cash 12,000

B. Total salary expense for 2013 is $12,000. $6,500 of that amount had not been paid at December
31, 2013.

C. $4,600 of consulting services performed in December 2013 was paid for using gift cards. Since
the transaction did not involve cash the bookkeeper didnt prepare an entry [Hint: gift cards are
part of unearned revenue]

D. The December 2013 utility bill was received on December 30, 2013. The amount of the bill was
$2,700. No entry had been made.

E. The interest rate on the mortgage is 4.25% per year and is payable semi-annually. The mortgage
on the building was advanced on September 1, 2013.

F. The building and equipment are depreciated on a straight-line basis. When purchased the
building had an estimated useful life of 40 years and the equipment had an estimated useful life
of 5 years. Estimated residual values are $0 and $7,500 for the building and the equipment
respectively.

G. Consulting services in the amount of $1,500 were delivered in December 2013 but payment has
not yet been received from the client.

H. A box of books was found during the year-end inventory count. The books had been damaged
during a recent flood in the warehouse. Cost of the books is $1,600 and the resale value is zero
($0).

Required:
A. Prepare the necessary correcting entries [10 marks]
B. Prepare an adjusted trial balance [15 marks]

Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2

Professor Wallace Fall 2014
4

4. Prepare a Cash Flow Statement for Rocket Corp. for the year ended December 31, 2013.
Use the indirect method for the operating section. Use the balances provided below. [10
marks]
Rocket Corporation
Statement of Financial Position
At December 31,
2013 2012
Cash $8,000 $15,000
Accounts Receivable 20,000 15,000
Inventory 15,000 25,000
Prepaid Rent 9,000 6,000
Total Current Assets 52,000 61,000
Land 75,000 75,000
Plant & Equipment 400,000 300,000
Accumulated depreciation (65,000) (30,000)
Total Assets $462,000 $406,000

Accounts payable 12,000 10,000
Income taxes payable 3,000 5,000
Unearned Revenue 35,000 25,000
Total Current Liabilities 50,000 40,000
Bonds payable 75,000 105,000

Common shares 200,000 150,000
Retained earnings 137,000 111,000
Total Shareholders Equity 337,000 261,000

Total Liabilities &
Shareholders Equity
$462,000 $406,000

Additional information:

a. Net Income for 2013 was $26,000
b. Depreciation expense in 2013 was $35,000
c. New plant and equipment items were acquired for cash
d. An issue of bonds was retired at book value
e. Additional common shares were issued for cash


5. Select two (2) public companies from an industry that you are interested in. For example, auto
manufacturing, clothing retail, financial services, foodservices, health care, oil & gas,
technology, etc. Reuters, at www.reuters.com provides lists of industries.

Locate the most current set of financial statements for each company. Financial statements are
often available on the companys website. They can also be found at www.sedar.com. SEDAR is
Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2

Professor Wallace Fall 2014
5

the Canadian Securities Administrators System for Electronic Document and Analysis. Use the
Search Database section of the website and select search for public company documents

Companies may issue a 10K instead of or in addition to the annual financial statements if they are
listed on a US stock exchange e.g. Nasdaq or NYSE. This report is filed with the Securities
Exchange Commission (SEC) in the United States. The 10K may be found on the companys
website.

Required:

a. Complete the attached template for each company.
b. Comment on the similarities and differences that you noted between the two companies.

Your submission should be typed. The template is available as a Word document that can be
downloaded. A copy of the relevant financial statement information MUST be attached to the
template.





Marks
Question #1 / 5
Question #2 / 40
Question #3 / 25
Question #4 / 10
Question #5 / 10
Total / 90

Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2

Professor Wallace Fall 2014
6

ADMN 3221H - Assignment #2 - Company Analysis Template (complete a template for each
company) [5 marks] and answer the questions on p.2 of the template [5 marks] A copy of the
statements and other supporting information must be attached to the template (e.g. significant
accounting policies note). Note: missing statements and/ or supporting information results in a mark
of 0 (zero) for the template component of the question.

Company Name:


Industry / Major Product (s):


Fiscal year-end [day, month &
year]

Reporting currency:
(e.g. Cdn $, , , !, etc.)

GAAP (e.g. FASB, IFRS, Euro-
IFRS, etc.)


Title of each financial
statement:



Number of notes to the
financial statements:

Audit Firm:


Date of Auditors Report:


Why did you choose this
company?




Intermediate Financial Accounting I - ADMN 3221H
Accounting Assignment #2

Professor Wallace Fall 2014
7


Questions #1 and #2 require you to discuss similarities and differences noted between the 2 companies
you selected. Your response should address:

1. Significant accounting policies: Are there major differences in the accounting policies
used for: inventory, cash & cash equivalents, intangible assets, goodwill, investments,
property, plant and equipment, and revenue recognition?
Briefly comment on the differences [3 marks]

2. Other differences noted between the 2 selected companies: For example, date of fiscal year-
end, auditors, content of auditors report. [2 marks]