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Chapter 5: Question 3ISTQ (page 262)

3. Companies that use IFRS:

(a) may report all their assets on the statement of financial position at fair value.

(b) are not allowed to net assets (assets − liabilities) on their statement of financial positions.

(c) may report non-current assets before current assets on the statement of financial position.

(d) do not have any guidelines as to what should be reported on the statement of financial position.

Short Answer

Expert verified

The correct option is (c) may report non-current assets before current assets on the statement of financial position.

Step by step solution

01

Definition of Statement of Financial Position

The statement that is generally concerned with the reporting of all assets and liabilities of the business entity is known as the statement of financial position.

02

The Explanation for Correct option

Companies that adopt IFRS report their balance sheet items in reverse order of GAAP. Under IFRS, non-current assets are reported first, and then-current assets are reported. The same procedure is followed in the liabilities section.

03

The Explanation for Incorrect options

(a) The business entity’s assets are not reported at fair value under IFRS.

(b) IAS 5 states that a business entity can disclose its net assets on the financial statement.

(d) IAS 1 states all the requirements regarding what must be reported on the statement of the financial position.

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Most popular questions from this chapter

2. Current assets under IFRS are listed generally:

(a) by importance.

(b) in the reverse order of their expected conversion to cash.

(c) by longevity.

(d) alphabetically.

5. A company has purchased a tract of land and expects to build a production plant on the land in approximately five years. During the 5 years before construction, the land will be idle. Under IFRS, the land should be reported as:

(a) land expense.

(b) property, plant, and equipment.

(c) an intangible asset.

(d) a long-term investment.

What is working capital? How does working capital relate to the operating cycle?

E5-10 (L02,3) (Current Liabilities) Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year.

(a) On December 20, 2017, a former employee filed a legal action against Baylor for \(100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote.

(b) Bonuses to key employees based on net income for 2017 are estimated to be \)150,000.

(c) On December 1, 2017, the company borrowed \(600,000 at 8% per year. Interest is paid quarterly.

(d) Accounts receivable at December 31, 2017, is \)10,000,000. An aging analysis indicates that Baylor’s expense provision for doubtful accounts is estimated to be 3% of the receivables balance.

(e) On December 15, 2017, the company declared a \(2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2018.

(f) During the year, customer advances of \)160,000 were received; $50,000 of this amount was earned by December 31, 2017.

Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.

Stowe Company’s December 31, 2017, trial balance includes the following accounts: Investment in Common Stock \(70,000, Retained Earnings \)114,000, Trademarks \(31,000, Preferred Stock \)152,000, Common Stock \(55,000, Deferred Income Taxes \)88,000, Paid-in Capital in Excess of Par—Common Stock \(174,000, and Noncontrolling Interest \)63,000. Prepare the stockholders’ equity section of the balance sheet.
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