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Chapter 3: 4IFRS (page 150)

Becker Ltd. is planning to adopt IFRS and prepare its first IFRS financial statements at December 31, 2018. What is the date of Becker’s opening balance sheet, assuming one year of comparative information? What periods will be covered in Becker’s first IFRS financial statements?

Short Answer

Expert verified

The opening balance sheet will be prepared on January 1, 2017. The first IFRS financial statement will be covered between January 1, 2018, to December 31, 2018.

Step by step solution

01

Explanation of First-Time Adoption of IFRS

In case the company wants to use IFRS for preparing its financial statements, then the first IFRS financial statement should include high-quality information. As per IFRS 1, the information furnished in the first statement should be transparent, must include a suitable starting point, and should have a cost that should not be greater than its benefits.

02

Explanation of reporting financial statements

In case of conversion from GAAP to IFRS, the company is required to choose the transition date, which is the beginning of the earliest period for which the comparative IFRS statement is prepared. The company is required to prepare comparative IFRS financial statements for two years. The reporting date is the date of the ending balance sheet for the first IFRS financial statement.

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Most popular questions from this chapter

BE3-5 (L02,3) Assume that on February 1, Procter & Gamble (P&G) paid $720,000 in advance for 2 years’ insurance coverage. Prepare P&G’s February 1 journal entry and the annual adjusting entry on June 30.

What are the characteristics of high-quality information in a company’s first IFRS financial statements?

The trial balance of Bellemy Fashion Center contained the following accounts at November 30, the end of the company’s fiscal year.

BELLEMY FASHION CENTER

TRIAL BALANCE

NOVEMBER 30, 2017

Debit

Credit

Cash

\( 28,700

Accounts Receivable

33,700

Inventory

45,000

Supplies

5,500

Equipment

133,000

Accumulated Depreciation—Equipment

\) 24,000

Notes Payable

51,000

Accounts Payable

48,500

Common Stock

90,000

Retained Earnings

8,000

Sales Revenue

757,200

Sales Returns and Allowances

4,200

Cost of Goods Sold

495,400

Salaries and Wages Expense

140,000

Advertising Expense

26,400

Utilities Expenses

14,000

Maintenance and Repairs Expense

12,100

Delivery Expense

16,700

Rent Expense

24,000

\(978,700

\)978,700

Adjustment data:

1. Supplies on hand total \(1,500.

2. Depreciation is \)15,000 on the equipment.

3. Interest of \(11,000 is accrued on notes payable at November 30.

Other data:

1. Salaries expense is 70% selling and 30% administrative.

2. Rent expense and utilities expenses are 80% selling and 20% administrative.

3. Notes payable worth \)30,000 are due for payment next year.

4. Maintenance and repairs expense is 100% administrative.

Instructions

(a) Journalize the adjusting entries.

(b) Prepare an adjusted trial balance.

(c) Prepare a multiple-step income statement and retained earnings statement for the year and a classified balance sheet as of November 30, 2017.

(d) Journalize the closing entries.

(e) Prepare a post-closing trial balance.

On January 1, 2017, Norma Smith and Grant Wood formed a computer sales and service company in Soapsville, Arkansas, by investing \(90,000 cash. The new company, Arkansas Sales and Service, has the following transactions during January.

1. Pays \)6,000 in advance for 3 months’ rent of office, showroom, and repair space.

2. Purchases 40 personal computers at a cost of \(1,500 each, 6 graphics computers at a cost of \)2,500 each, and 25 printers at a cost of \(300 each, paying cash upon delivery

3. Sales, repair, and office employees earn \)12,600 in salaries and wages during January, of which \(3,000 was still payable at the end of January.

4. Sells 30 personal computers at \)2,550 each, 4 graphics computers for \(3,600 each, and 15 printers for \)500 each; \(75,000 is received in cash in January, and \)23,400 is sold on a deferred payment basis.

5. Other operating expenses of \(8,400 are incurred and paid for during January; \)2,000 of incurred expenses are payable at January 31.

Instructions

  1. Using the transaction data above, prepare (1) a cash-basis income statement and (2) an accrual-basis income statement for the month of January.
  2. Using the transaction data above, prepare (1) a cash-basis balance sheet and (2) an accrual-basis balance sheet as of January 31, 2017.
  3. Identify the items in the cash-basis financial statements that make cash-basis accounting inconsistent with the theory underlying the elements of financial statements.

Rolling Hills Golf Inc. was organized on July 1, 2017. Quarterly financial statements are prepared. The unadjusted trial balance and adjusted trial balance on September 30 are shown below.

ROLLING HILLS GOLF INC.TRIAL BALANCESEPTEMBER 30, 2017


Unadjusted
Adjusted

Dr.

Cr.

Dr.

Cr.

Cash

\( 6,700

\) 6,700

Accounts Receivable

400

1,000

Prepaid Rent

1,800

900

Supplies

1,200

180

Equipment

15,000

15,000

Accumulated Depreciation—Equipment

\( 350

Notes Payable

\) 5,000

5,000

Accounts Payable

1,070

1,070

Salaries and Wages Payable

600

Interest Payable

50

Unearned Rent Revenue

1,000

800

Common Stock

14,000

14,000

Retained Earnings

0

0

Dividends

600

600

Service Revenue

14,100

14,700

Rent Revenue

700

900

Salaries and Wages Expense

8,800

9,400

Salaries and Wages Expense

900

1,800

Rent Expense

350

Depreciation Expense

1,020

Supplies Expense

470

Utilities Expenses

50

Interest Expense

\(35,870

\)35,870

\(37,470

\)37,470

Instructions

  1. Journalize the adjusting entries that were made.
  2. Prepare an income statement and a retained earnings statement for the 3 months ending September 30 and a classified balance sheet at September 30.
  3. Identify which accounts should be closed on September 30.
  4. If the note bears interest at 12%, how many months has it been outstanding?
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