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Chapter 13: Question 15Q (page 691)
Under what conditions should a short-term obligation be excluded from current liabilities?
When it intends and has the ability to refinance the obligation on a long-term basis, the short-term obligation would be excluded from current liabilities.
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(Equity Securities Entries) McElroy Company has the following portfolio of investment securities at September
30, 2017, its most recent reporting date.
Investment Securities Cost Fair Value
Horton, Inc. common (5,000 shares) \(215,000 \)200,000
Monty, Inc. preferred (3,500 shares) 133,000 140,000
Oakwood Corp. common (1,000 shares) 180,000 179,000
On October 10, 2017, the Horton shares were sold at a price of \(54 per share. In addition, 3,000 shares of Patriot common stock
were acquired at \)54.50 per share on November 2, 2017. December 31, 2017, fair values were Monty \(106,000, Patriot
\)132,000, and Oakwood $193,000.
Instructions
Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2017
Komissarov Company has a debt investments in the bonds issued by Keune Inc. The bonds were purchased at par
for \(400,000 and, at the end of 2017, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for-collection. Keune is facing a tough economical environment and informs all of its investors that it will be unable to make all payments according to the contractul terms. The controller of Komissarov has prepared the following revised expected cash flow forecast for this bond investment.
December 31, Expected cash flows
2018 \)35,000
2019 35,000
2020 385,000
Total cash flows $455,000
Instructions
(a) Determine the impairement loss for Komissarov at December31, 2017.
(b) Prepare the entry to record the impairement loss for Komissarov at Decembber 31, 2017.
(c) On January 15, 2018, Keune receives a major capiatl infusion from a private equity investor. It informs Komissarov that the bonds now will be paid according to the contractual terms. Briefly describe how the Komissarov would account for the bond investment in light of this new information.
Grant Company has had a record-breaking year in terms of growth in sales and profitability. However, market research indicates that it will experience operating losses in two of its major businesses next year. The controller has proposed that the company record a provision for these future losses this year, since it can afford to take the charge and still show good results. Advise the controller on the appropriateness of this charge
Under IFRS, a provision is the same as:
(a) a contingent liability (c) a contingent gain
(b) an estimated liability (d) None of the above
Within the current liabilities section, how do you believe the accounts be listed? Defend your position.
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