ACCT 1220 Lecture Notes - Lecture 10: Sales Taxes In Canada, Contingent Liability, Qst

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pinklizard68

20 Feb 2019

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Liabilities: present obligations resulting from past transactions, classified as current and non-current. Liabilities must be settled in the future by transfer of assets or provision of services. Current liabilities: expected to be paid or settled: Through payment by cash, through the transfer of goods or services or through the creation of other current liabilities. Within one year of the date on the statement of financial position. All other liabilities are classified as non-current (or long-term) liabilities. Types of current liabilities include: bank indebtedness from operating lines of credit, accounts payable and accrued liabilities, unearned revenue, notes and loans payable, sales taxes, property taxes, payroll, current maturities of non-current debt, provisions and contingent liabilities. Operating line of credit: pre-arranged agreement between a company and a lender to allow the company to borrow up to an agreed-upon amount: Interest is charged using a floating (or variable) interest rate: security (collateral) may be required by bank, when used, results in bank indebtedness.

Related Questions

In addition to presenting the computed answers, please also discuss how you arrived at each answers the accounting problem asks. The accounting problem presents a companyâs balance sheet and income statement. The Diamond Gem Cleaning and Maintenance Service Company is in the business of contracting its cleaning and maintenance services to office buildings. The balance sheet and income statement have blank lines. Determine the values that would be appropriate for each blank line. Provide a narrative of how you arrived at each value. In doing so, explain the account being valued and its relationship to the other financial data. For example, if the accounts payable line was missing, explain that you can derive its value based on knowing all the other values of the current liabilities section. Then explain what an account liability is, as well as why it would belong in the current liabilities section of the balance sheet

Please refer to the income statement and balance sheet of the Diamond Gem Cleaning and Maintenance Service Company available down:

Superior papers will mention and explain the following elements when responding to the assignment question:

Provide correct balances for the blank financial account lines.

Provide a narrative about how the values were determined.

Provide a definition and explanation of each account line that was completed

Balance sheet
ASSETS

CURRENT ASSETS

Cash		225,971
Contracts receivables		[__A____]
Other assets		162,847

Total current assets		893,868

LONG TERM ASSETS

Equipment		[___B____]

TOTAL ASSETS		1,180,660

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable		[__C____]
Line of credit		85,000
Accrued expenses		72,495
Income tax payable		46,660
Current portion of notes payable		31,747
Deferred income taxes		78,460

Total current liabilities		571,697

LONG TERM LIABILITIES
Notes payable (long term)		172,467

TOTAL LIABILITIES		744,164

STOCKHOLDERS' EQUITY

Common stock	62,000
Additional paid-in capital	63,862

Retained Earnings	[___D___]

Total stockholders' equity		436,496

TOTAL LIABILITIES AND STOCKHOLDERS EQUITY		[___E___]

Income sheet

Contract Revenues	5,146,862

Contract Costs	[___F____]

Gross Profit	614,343

General and Administrative Expenses	322,356

Operating Income	291,987

Other Expense	25,770

Income Before Provision for Income Taxes	266,217

Provision for Income Taxes	[__G____]

Net Income	150,767


Retained Earnings, Beginning Balance	[__H____]

Net Income	150,767

Retained Earnings, Ending Balance	310,634

cyanmosquito456

Match the following:

1. Acid-test ratio

2. Current portion of long-term debt

3. Recording a contingent liability

4. Commercial paper

5. Deferred revenues

6. Line of credit

7. Accrual accounting

8. Interest expense

9. The riskiness of a business's obligations

10. Disclosure of a contingent liability

A Cash, short-term investments, and accounts receivable alldivided by current liabilities.

B Loss is probable and amount is reasonably estimable.

C Gift cards

D Long-term debt maturing within one year.

E Informal agreement that permits a company to borrow up to aprearranged limit.

F Interest expense is recorded in the period interest isincurred rather than in the period interest is paid

G Loss is reasonably possible and amount is reasonablyestimable

H Incurred on a notes payable

I obligations Unsecured notes sold in minimum denominations of$25,000 with maturities up to 270 days

J Classifying liabilities as either current or long-term helpsinvestors and creditors assess this.

amaranthwasp103

Challenger Limited
Balance Sheets for the year
ended at 31 December
( U.S dollars)
	2007	2008
Assets
Non-Current Assets
Property , plan and equipment	$152,425,129.00	$49,410,844.00
Total non-currentassets	$152,425,129.00	$49,410,844.00
Current assets
Spare parts inventory	$6,956,849.00	$12,874,676.00
Receivables and prepayments	$40,518,272.00	$18,887,780.00
Due from related parties	$519,044.00	$140,136.00
Cash and Cash equivalents	$2,842,879.00	$2,753,003.00
TotalCurent assets	$50,837,044.00	$34,655,595.00
Total Assets	$202,262,173.00	$84,066,439.00

Equity and liabilities
Equity
Capital	$64,957,265.00	$50,000,000.00
Additional Paid-in Capital	$70,795,653.00	$15,000,000.00
Revaluation reserve	$16,782,544.00	$1,403,983.00
Other	-$1,368,122.00
R/E	$9,240,432.00	$2,314,787.00
Total Equity	$160,407,772.00	$68,721,770.00
Liabilities
Non-Current Liabilities
Borrowings	$4,545,190.00	$738,499.00
Total Non-CurrentLiabilities	$4,545,190.00	$738,499.00
Current Liabilities
Borrowings	$13,554,645.00	$2,676,000.00
Trade and other payables	$14,060,820.00	$7,016,164.00
Current Tax liabilities	$4,062,411.00	$2,869,643.00
Provisions	$491,280.00
Divididends and redemption payable	$3,078,302.00	$2,044,363.00
Due to related parties	$3,061,753.00
Total CurrentLiabilities	$38,309,211.00	$14,606,170.00
Total liabilities	$42,854,401.00	$15,344,669.00
Total equity and liabilities	$203,262,173.00	$84,066,439.00

Challenger Limited
Statements of Income
for the year ended
31 of december
( US dollars)
	2007	2008

Drilling revenue	$73,071,917.00	$46,043,831.00
Drilling costs	-$52,933,369.00	-$34,309,267.00
Gross Profit	$20,138,548.00	$11,734,564.00
General and administrative Expenses	-$9,775,827.00	-$8,021,383.00
Other income	$2,446,433.00	$19,005.00
Other expense	-$1,870,000.00
Operating (loss) / Profit fromoperations	$10,939,154.00	$3,732,186.00

Finance income	$46,015.00	$751,224.00
Finance cost	-$673,397.00	-$559,662.00
(Loss) / profit before income tax	$10,311,772.00	$3,923,748.00
Income tax	-$3,389,127.00	-$2,307,594.00
(Loss)/ profit for the year	$6,922,645.00	$1,616,154.00

Basis of Preparation The financial statements have been preparedin accordance with International Financial Reporting Standards(IFRS). The financial statements have been prepared under thehistorical cost convention as modified by the revaluation of therigs. Rigs include drilling equipment, well control equipment,electrical equipment, power plant, and so on.

Required:

A. Since the financial statements are prepared in U.S. dollars,does this imply that the financial statements are prepared inaccordance with U.S. GAAP? Why or why not?

B. List three major differences between this balance sheet incomparison to balance sheets prepared under U.S. GAAP.

C. Evaluate the performance of the company using the incomestatement. What appears to be the cause of the major change inperformance?

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ACCT 1220 Lecture Notes - Lecture 10: Sales Taxes In Canada, Contingent Liability, Qst

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