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Chapter 24: Question 4IFRS (page 1467)

Keystone Corporation’s financial statements for the year ended December 31, 2017, were authorized for issue on March 10, 2018. The following events took place early in 2018.

  1. On January 10, 10,000 ordinary shares of \(5 par value were issued at \)66 per share.
  2. On March 1, Keystone determined after negotiations with the taxing authorities that income taxes payable for 2017 should be \(1,320,000. At December 31, 2017, income taxes payable were recorded at \)1,100,000.

Instructions

Discuss how the preceding subsequent events should be reflected in the 2017 financial statements.

Short Answer

Expert verified

No alteration should be reported for issued shares. Keystone should increase income tax by $220,000.

Step by step solution

01

Meaning financial statement

A company's financial statements provide a precise picture of its financial success. They refer to it as assets and liabilities rather than profit and loss. It's the same as it was at the end of all accounting forms where these explanations might be presented.

02

Discussing the preceding subsequent events that should be reflected in the 2017 financial statements

1. The issuance of standard offers is a case of a consequent event which gives proof of almost conditions that did not exist at the explanation of the financial position date but emerged consequent to that date. Subsequently, no alteration to the financial statements is recorded. In any case, this event ought to be disclosed either in a note, a supplemental plan, or even proforma financial data.

2. The changed estimate of income taxes payable is an illustration of a consequent event that gives extra proof around conditions that existed at the explanation of the financial position date. The pay assessment liability existed on December 31, 2017, but the sum was not certain.

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Most popular questions from this chapter

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Jane Ellerby and Sam Callison are discussing the recent fraud that occurred at LowRental Leasing, Inc. The fraud involved the improper reporting of revenue to ensure that the company would have income in excess of $1 million. What is fraudulent financial reporting, and how does it differ from an embezzlement of company funds?

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Morlan Corporation is preparing its December 31, 2017, financial statements. Two events that occurred between December 31, 2017, and March 10, 2018, when the statements were authorized for issue, are described below.

  1. A liability, estimated at \(160,000 at December 31, 2017, was settled on February 26, 2018, at \)170,000.
  2. A flood loss of $80,000 occurred on March 1, 2018.

Instructions

What effect do these subsequent events have on 2017 net income?

Interim reporting under IFRS:

(a) is prepared using the discrete approach.

(b) is prepared using a combination of the discrete and integral approach.

(c) requires a complete set of financial statements for each interim period.

(d) permits companies to omit disclosure of material events subsequent to the interim reporting date.
See all solutions

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