Balance Sheet and Statement of Cash Flows

Intermediate Accounting (Kieso) · 105 exercises

Question 3ISTQ

3. Companies that use IFRS:

(a) may report all their assets on the statement of financial position at fair value.

(b) are not allowed to net assets (assets − liabilities) on their statement of financial positions.

(c) may report non-current assets before current assets on the statement of financial position.

(d) do not have any guidelines as to what should be reported on the statement of financial position.

3 step solution

Question 4IFRS

IFRS5-4 Rainmaker Company prepares its financial statements in accordance with IFRS. In 2017, Rainmaker recorded the following revaluation adjustments related to its buildings and land: The company’s building increased in value by $200,000; its land declined by $35,000. How will these revaluation adjustments affect Rainmaker’s statement of financial position? Will the reporting differ under GAAP? Explain.

2 step solution

Question 4ISTQ

4. Franco Company uses IFRS and owns property, plant, and equipment with a historical cost of $5,000,000. At December 31, 2016, the company reported a valuation reserve of $690,000. At December 31, 2017, the property, plant, and equipment was appraised at \(5,325,000. The valuation reserve will show what balance at December 31, 2017?

(a) \)365,000.

(b) \(325,000.

(c) \)690,000.

(d) $0.

3 step solution

Question 5ISTQ

5. A company has purchased a tract of land and expects to build a production plant on the land in approximately five years. During the 5 years before construction, the land will be idle. Under IFRS, the land should be reported as:

(a) land expense.

(b) property, plant, and equipment.

(c) an intangible asset.

(d) a long-term investment.

3 step solution

5IFRS

Presented below is the balance sheet for Tomkins plc, a British company.

Tomkins plc Consolidated Balance Sheet (amounts in £ million)

Particular	Amount £
Non-Current Assets
Goodwill	436
Other tangible assets	78
Property, plant, and equipment	1,122.80
Investment in associates	20.6
Trade and other receivables	81.1
Deferred tax assets	82.9
Post-employment benefits surpluses	1.3
	1,822.7
Current assets
Inventories	590.8
Trade and other receivables	753
Income tax recoverable	49
Available for sale investment	1.2
Cash and Cash equivalents	445
	1,839
Assets held for sale	11.9
Total assets	3,673.6

Current liabilities
Bank overdraft	4.8
Bank and other loans	11.2
Obligations under finance leases	1
Trade and other payables	677.6
Income tax liabilities	15.2
Provisions	100.3
	810.1

Non-Current liabilities
Bank and other loans	687.3
Obligations under financial leases	3.6
Trade and other payables	27.1
Post-Employment benefits obligations	343.5
Deferred tax liabilities	25.3
Income tax liabilities	79.5
Provisions	19.2
	1,185.5
Total liabilities	1,995.6
Net assets	1,678
Capital reserve
Ordinary share capital	79.6
Share premium account	799.2
Own shares	(8.2)
Capital redemption reserve	921.8
Currency translation reserve	(93)
Available for sale reserve	(0.9)
Accumulated deficit	(161.9)
Shareholder’s equity	1,536.6
Minority interest	141.4
Total equity	1,678

Instructions

(a) Identify at least three differences in balance sheet reporting between British and U.S. firms, as shown in Tomkins’ balance sheet.

(b) Review Tomkins’ balance sheet and identify how the format of this financial statement provides useful information, as illustrated in the chapter.

3 step solution

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