3 Transactions from Gravenhurst Inc.'s current year follow. Gravenhurst follows IFRS. Gravenhurst Inc. thinks it should dispose of its excess land....
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Denis Mayer has prepared the following list of statements about managerial accounting and financial accounting. Identify each statement as true or false. 1. Financial accounting focuses on providing information to internal users. 2. Analyzing cost-volume-profit relationships is part of managerial accounting. 3. Preparation of budgets is part of financial accounting. 4. Managerial accounting applies only to merchandising and manufacturing companies. 5. Both managerial accounting and financial accounting deal with many of the same economic events. 6. Managerial accounting reports are prepared only quarterly and annually. 7. Financial accounting reports are general-purpose reports. 8. Managerial accounting reports pertain to subunits of the business. 9. Managerial accounting reports must comply with generally accepted accounting principles. 10. Although managerial accountants are expected to behave ethically, there is no code of ethical standards for managerial accountants.

The Blue Plum Company's Office Supplies account had a beginning balance of $16,000. During the month, purchases of office supplies totaling $4,000 were debited to the Office Supplies account. If $6,000 worth of office supplies is still on hand at month-end, what is the proper adjusting entry?

a. A) Office Supplies 14,000

Office Supplies Expense 14,000


b. A) Office Supplies Expense 6,000

Office Supplies 6,000


c. A) Office Supplies Expense 14,000

Office Supplies 14,000


d. A) Office Supplies 6,000

Office Supplies Expense 6,000.

part B

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P2.3 Transactions from Gravenhurst Inc.'s current year follow. Gravenhurst follows IFRS. 1. Gravenhurst Inc. thinks it should dispose of its excess land. While the carrying value is $50,000, current market prices are depressed and only $25,000 is expected upon disposal. The following journal entry was made: Loss on Disposal of Land 25,000 Land 25,000 2. Merchandise inventory that cost $630,000 was reported on the statement of financial position at $690,000, which is the expected selling price less estimated selling costs. The following entry was made to record this increase in value: Inventory 60,000 Sales Revenue 60,000 3. The company is being sued for $500,000 by a customer who claims damages for personal injury that was allegedly caused by a defective product. Company lawyers feel extremely confident that the company will have no liability for damages resulting from the situation. Nevertheless, the company decides to make the following entry: Litigation Expense 450,000 Litigation Liability 450,000 4. Because the general level of prices increased during the current year, Gravenhurst Inc. determined that there was a $15,000 understatement of depreciation expense on its equipment and decided to record it in its accounts. The following entry was made: Depreciation Expense 15,000 Accumulated Depreciation-Equipment 15,000 5. Gravenhurst Inc. has been concerned about whether intangible assets could generate cash in case of liquidation. As a result, goodwill arising from a business acquisition during the current year and recorded at $800,000 was written off as follows: Retained Earnings 800,000 Goodwill 800.000 6. Because of a "fire sale," equipment that was obviously worth $200,000 was acquired at a bargain price of $155,000. The following entry was made: 200,000

WA W RIMMEL WOUL VIL VELWEEN UHIUHIUUOn Characteristics? P2-5 You are hired to review the accounting records of Sheridan Inc. (a public corporation) before it closes its reve- nue and expense accounts as at December 31, 2017, the end of its current fiscal year. The following information comes to your attention. 1. During the current year, Sheridan Inc. changed its shipment policy from f.o.b. destination to f.o.b shipping point. This would result in an additional $50,000 of revenue being recorded for fiscal 2017. 2. The estimated remaining useful life of its manufacturing equipment was reviewed by management and increased by five years. This reduced depreciation expense by $30,000 during fiscal 2017. 3. When the statement of financial position was prepared, detailed information about the amount of cash on deposit in each of several banks was omitted. Only the total amount of cash under a caption "Cash in banks" was presented. 4. During the current year, Sheridan Inc. purchased an undeveloped piece of land for $320,000. The company spent $80,000 on subdividing the land and getting it ready for sale. A property appraisal at the end of the year indicated that the land was now worth $500,000. Although none of the lots was sold, the company recognized revenue of $180,000, less related expenses of $80,000, for a net income on the project of $100,000. The company has histori- cally used the cost model for this type of property. 5. For several years, the company used the FIFO method for inventory valuation purposes. During the current year, the president noted that all the other companies in the industry had switched to the moving average method. Sheridan Inc. decided not to switch to moving average because net income would decrease by $600,000. 6. During fiscal 2017, new government legislation was passed requiring companies like Sheridan to install additional health and safety devices in their offices by 2022. Although Sheridan does not intend to retrofit the required new devices until 2022, an accrual for $375,500 has been established in the year-end financial statements for the future installation costs. 7. To maintain customer goodwill, Sheridan voluntarily recalled some products during the year. Sheridan has not established an accrual and is recording the sales returns as they happen. Instructions State whether or not you agree with each of the accounting decisions made by Sheridan Inc. Explain your reasoning and, wherever possible, support your answers by referring to the generally accepted accounting principles that apply to the circumstances. that in

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