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Solution Manual for Intermediate Accounting (Volume 1), 8th Canadian Edition By Thomas H. Beechy, Joan E. Conrod, All Chapters 1 - 11, Complete Newest Version$17.99
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Solution Manual for Intermediate Accounting (Volume 1), 8th Canadian Edition By Thomas H. Beechy, Joan E. Conrod, All Chapters 1 - 11, Complete Newest Version
Solution Manual for Intermediate Accounting (Volume 1), 8th Canadian Edition By Thomas H. Beechy, Joan E. Conrod, All Chapters 1 - 11, Complete Newest Version
Chapter 1: The Framework for Financial Reporting
Chapter 2: Accounting Judgements
Chapter 3: Statements of Income and Comprehensive I...
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There is a conflict of interest between the objectives of Elicia and Dabika due to the
buyout clause in the shareholder agreement. Elicia will have a motivation to
decrease shareholders‘ equity since this will reduce the amount that she will be
required to pay to buy out Dabika. Dabika will be interested in increasing shareholders‘
equity to increase the amount she will receive. It must be clarified who I am working for
since I may have a conflict of interest since I know both parties.
It is important that all accounting policies are ‗fair‘ to both sides. What is considered
‗fair‘? From Dabika‘s perspective, fair could be accounting policies consistent with prior
years. From Elicia‘s perspective, fair could be if the economic events change the
accounting policy would change. Fair could be both sides split the difference where
Dabika and Elicia disagree on value. In the future it is important that the
shareholders agreement is more specific.
Due to the choices allowed within GAAP a policy could be selected that would be more
beneficial to one of the parties. It is assumed since this is a small private company
that they are using ASPE. There is no indication that neither Elicia or Dabika would be
using IFRS nor that the bank requires it.
Inventory
Elicia wants to write off the inventory value for the garden gnomes and statues and
this will decrease the amount of the payment to Dabika. According to ASPE, inventory
would be valued at the lower of cost and net realizable value. Even though this
inventory has been sitting in the gardening centre there is still a few being sold each
year. This indicates there is still some value associated with the inventory and
therefore it should not be written down to zero. It should be determined what
the net realizable value of this inventory is to determine the amount of the write off.
If it is all written off and then sold at a later date this would not be fair to Dabika
since Elicia would get the benefit of a reduced shareholders‘ equity and thus a lower
payment required to Dabika. The purchase of this inventory would have been a
decision made by both Dabika and Elicia so if the inventory is unsellable they should
both bear the impact of this decision.
Warranty
According to ASPE the accounting policy is appropriate and a warranty expense should
be included for the guarantee. The impact is that this would decrease shareholders‘
equity and the amount of the payment to Dabika. This is a new policy that did not exist
until this year. The estimate of 5% was only based on sales from the fall. Since it is a
new policy that was made by Elicia on her own it may be appropriate that the
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