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Chapter 3: Q4IFRS (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’sfirst IFRS financial statements?

Short Answer

Expert verified

Opening balance sheet will be prepared January 1,2017. First IFRS financial statement will be covered between January 1,2018 to December 31,2018.

Step by step solution

01

Explanation on First-Time Adoption of IFRS

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

02

Explanation on reporting financial statements

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

Question: What are reversing entries, and why are they used?

Which statement is correct regarding IFRS?

(a) IFRS reverses the rules of debits and credits, that is,debits are on the right and credits are on the left.

(b) IFRS uses the same process for recording transactionsas GAAP.

(c) The chart of accounts under IFRS is different becauserevenues follow assets.

(d) None of the above statements are correct.

Andrea Pafko, a fellow student, contends that the double-entry system means that each transaction must be recorded twice. Is Andrea correct? Explain.

A review of the ledger of Baylor Company at December 31, 2017, produces the following data pertaining to the preparation of annual adjusting entries.

  1. Salaries and Wages Payable \(0. There are eight employees. Salaries and wages are paid every Friday for the current week. Five employees receive \)700 each per week, and three employees earn \(600 each per week. December 31 is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of December.

  2. Unearned Rent Revenue \)429,000. The company began subleasing office space in its new building on November 1. Each tenant is required to make a \(5,000 security deposit that is not refundable until occupancy is terminated. At December 31, the company had the following rental contracts that are paid in full for the entire term of the lease.

    Date

    Term (in months)

    Monthly Rent

    Number of Leases

    Nov. 1

    6

    \)6,000

    5

    Dec. 1

    6

    \(8,500

    4

  3. Prepaid Advertising \)13,200. This balance consists of payments on two advertising contracts. The contracts provide for monthly advertising in two trade magazines. The terms of the contracts are as shown below.

    Contract

    Due date

    Amount

    Number of magazine issue

    A650

    May 1

    \(6,000

    12

    B974

    Oct. 1

    7,200

    24

    The first advertisement runs in the month in which the contract is signed

  4. Notes Payable \)60,000. This balance consists of a note for one year at an annual interest rate of 12%, dated June 1.

    Instructions

    Prepare the adjusting entries at December 31, 2017. (Show all computations).
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