Monetary vs. non-monetary items (a) In Dec 01, entity E delivers merchandise to entity F. Hence, E recognizes a trade receivable. (b) On Dec 31, 01, merchandise is stored in E”s warehouse. (c) On Dec 01, 01, E pays the rent for a machine rented under an operating lease for the period Dec 01, 01 to Feb 28, 02 in advance. The rent is CU […]

Foreign currency transactions – monetary items On Dec 31, 01, entity E has trade receivables from the foreign customers A and B. E”s functional currency is the yen. The following quotes are direct (1 foreign currency unit = x yen): Date of Transaction Foreign currency units Exchange rate on the date of transaction Exchange rate on Dec 31, 01 Customer A 1-Nov-01 20 m 3 […]

Foreign currency transactions – testing for impairment On Dec 31, 01, merchandise is stored in entity E”s warehouse. This merchandise was acquired from a foreign supplier located in country C for 10 m foreign currency units and delivered on Nov 15, 01. E”s functional currency is the yen. The exchange rate was 10 at the date of the transaction and is 8 on Dec 31, […]

Disposals or partial disposals of foreign operations On Dec 31, 01, entity E holds 80% of the shares of entity F (which is a foreign subsidiary). F”s financial statements are translated according to the current rate method. Exchange differences of CU +10 have been recognized in other comprehensive income from the acquisition date until Dec 31, 01. Thereof, CU 8 have been attributed to the […]

Translation of foreign currency financial statements – monetary/non-monetary method Required The situation is the same as in Example 4. However, CNY is the functional currency of the foreign operation. Consequently, translation is effected according to the monetary/non-monetary method. Moreover, the liabilities of the foreign operation only consist of bank loans. Thus, they represent monetary items. The land, buildings, and inventories are measured at (amortized) cost. […]

Are these assets qualifying assets? Case (a): A particular item of inventory is produced by entity E in large quantities on a repetitive basis. Production takes (aa) 15 months, (ab) one week. Case (b): At the beginning of 01, E starts constructing a building. Construction will take three years. Once completed, the building will be used for administrative purposes. Case (c): E acquires a warehouse […]

Are these entities related parties? Entity A holds shares of entities B and C: A B C Version (a): B and C are both joint ventures of A. Version (b): B is a joint venture of A and C is an associate of A. Version (c): B and C are both associates of A. Required Assess whether C is a related party in B”s financial […]

Bruce receives Social Security benefits of $12,340, taxable interest of $8,320, wages from a part-time job of $6,250, and tax-exempt interest of $200. What is Bruce”s income for purposes of figuring the taxable portion of Social Security benefits? a. Incorrect. Tax-exempt interest cannot be excluded from income for purposes of calculating the taxable portion of Social Security benefits, so $20,740 (which is one-half of benefits, […]

Sue receives Social Security benefits of $8,670 on behalf of her dependent child, Tom. Which of the following statements is correct? a. Incorrect. Any benefits that may be taxable are based on the income of individual receiving the benefits. Sue”s income is not used for this purpose. b. Correct. Taxable benefits, if any, are based on Tom”s income because the benefits are his, not Sue”s. […]

Mr. Brown, a college student working on a degree in accounting, received the following amounts during the year to pay his expenses: $4,000 scholarship used for tuition at State University $1,000 scholarship used for fees and books required by the college, and $8,000 fellowship used for his room and board What amount does Mr. Brown include in taxable income for the year? a. Correct. Mr. […]