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. […]

Defined benefit plan without plan assets Entity E stipulated a defined benefit plan with its employees: 01 02 Actual obligation as at Jan 01 100 130 Current service cost 14 20 Interest cost 10 13 Benefits paid 8 11 Actual obligation as at Dec 31 130 140 Posting status: There have not yet been any entries. Required Prepare any necessary entries in E”s financial statements […]

Sherwood received disability income of $6,000. All premiums on the health and accident policy were paid by his employer and included in Sherwood”s income. In addition, he received compensatory damages of $10,000 as a result of inadvertent poisoning at a restaurant. He received no other income during the year. How much income does Sherwood report on his tax return? a. Incorrect. The health and accident […]

Deferred tax – change in the tax rate Entity E holds the following shares which were each acquired for CU 900: Shares of entity A: These shares meet the definition of “held for trading” (IFRS 9, Appendix A). Therefore, they are accounted for at fair value through profit or loss (IFRS 9.4.1.1–9.4.1.4, 9.5.7.1b, and 9.5.7.5). On Dec 31, 01, the carrying amount of these shares […]